Online retail sales grow despite security concerns

Today, the US Commerce Department released retail e-commerce data for July - September. It shows that retail sales increased 1.8% overall from the previous quarter, while retail sales increased almost 6% in the same time. E-commerce's share of total retail sales edged up slightly to 2.3%. Thus continues a slow but steady growth since the first release of e-commerce data for the fourth quarter of 1999, which showed that less than 1% of all retail sales were conducted online.

This seems to contradict a recent poll by Consumer Reports WebWatch, a service of Consumer Reports, whose results were released on 26 October. Entitled "Leap of Faith: Using the Internet Despite the Dangers" (pdf report) indicates that consumers are fearful of identity theft and have reduced their online commerce:

Nearly nine out of ten users (86 percent) have made at least one change in their behavior because of this fear:
• 30 percent say they have reduced their overall use of the Internet.
• A majority of Internet users (53 percent) say they have stopped giving out personal information on the Internet.
• 25 percent say they have stopped buying things online. • 54 percent of those who shop online report they have become more likely to read a site’s privacy policy or user agreement before buying.
• 29 percent of those who shop online say they have cut back on how often they buy on the Internet.

Recommendations to nonprofits:
1. Don't believe the polls. Use of the internet will continue to grow steadily, with regular leaps (election cycles, disasters, etc.).
2. Be respectful of donor's privacy and security concerns. Post an easy-to-read privacy policy and stick to it.
3. Make sure your donation processing follows industry guidelines.
4. Post your most recent 990 form and any industry efficiency recognition you have received, e.g. from CharityNavigator or others.

Rick...

Walmart is testing online. Are you?

An article in the New Yawk Times this week describes how Wal-Mart is testing higher priced items online and may place successful items in its stores.

"Over the last few weeks, it has added luxury items to its Web site as a test. The online store still caters overwhelmingly to buyers' appetite for low-cost deals, from $18 six-packs of boxer shorts to $15 roller-skate kits, just as its stores do. But now, if you look hard, you can also find a Hyundai 60-inch plasma TV with a built-in digital tuner for $7,688, a gift basket of 1,000 fine chocolates for $248 and 100 percent cashmere scarves for $98.88."

What is hinted at in the article is that online customers of Wal-Mart may be different than those of its retail stores. Of course, many are the same people, but the stores may attract a lower income audience that does not shop online, and the web site may attract a higher income, deal-seeking audience that does not shop retail.

Are you recognizing that (a) your online and offline audiences are very similar, in which case you may be able to test some copy or other marketing ideas online faster and with less risk than you can in the mail, or (b) you have significant differences between your two audiences, in which case you need to differentiate your offers while still retaining your overall brand identity?

If you are experimenting in either direction, please let us know.

Beware of State Legislation Pitfalls

A nonprofit charity that solicits funds in states other than its home state must register in most of those states (42 at last count). So do most fundraising agencies. This is unlike almost any other business, which does not have to register unless it is physically present in a state. The rules are complex and ever-changing. An attorney estimated that annual fees approach $10,000 when you add them all up. Here's a new report from the Direct Marketing Association's Nonprofit Federation (DMANF) on a recent development in Arkansas:

"Arkansas Attorney General Mike Beebe issued written opinion on August 29th stating that a nonprofit organization that solicits contributions from persons on the Internet without registering, pursuant to A.C.A section 4-28-402 has committed a criminal offense, and that certain key persons, corporate officers of the nonprofit could be held liable if they acted "knowingly and willfully" to violate the registration requirment.

"States increasingly seek to establish that a mere contact via the Internet is a sufficient contact to claim jurisdiction over an out-of-state charity, a tenuous connection at best in many instances. The DMANF is reviewing his memorandum."

Turning a failure to file paperwork into a crime is a disgrace.

Another item to note from the DMANF:

"NY AB 7013 & SB 4106: Mandates do not mail/call/email list. Each organization must maintain its own and must check the list that the State of NY will create. This would impose a tremendous burden on nonprofits. The bill is not specifically aimed at nonprofits, but the definitions of "individual reference service provider" (proposed N.Y. Gen. Bus. Law Art. 32-A § 676.6(B)) and "marketing list broker" (proposed N.Y. Gen. Bus. Law Art. 32-A § 676.6(C)) are drafted so broadly that they will likely encompass most nonprofits. The provisions of the act are quite onerous. Not only must an organization set up a toll-free line to accept opt-out request, but: such requests must be honored within five days; detailed notice must be given to everyone remaining on the list each time their name is shared; and organizations must provide a copy of all information on file for an individual upon demand."

Stay on top of these events at the DMANF's web site.

Nonprofit Postage Rates Going Up. Email More!

Earlier this month the Postal Rate Commission announced its recommendations to increase postal rates. The Direct Marketing Association reports that those rates will probably be approved and take effect in January of 2006. The nonprofit regular rates overall will go up 3%, but nonprofit enhanced carrier route mail rates, used in larger mailings will go up 12.3% overall, according to the DMA.

This means that email can be more profitable next year than this year. After all email rates aren't going up. It also means that when you use email to support direct mail fundraising, the results will be more important, since every extra dollar will be needed to pay for the postal rates.

That, in turn means that email append will be more important. With email append, you can increase the results of more house file direct mail appeals.

Don't let your organization take money out of your online budget to cover the postal increases. Instead, recommend ways that modest additional investment in online fundraising will help offset the increases, and improve the results of direct mail appeals.

Rick...

Forecasting Online Giving

Last week a client asked for our help in budgeting for 2006. "Based on our online giving this year, we think we could bring in $X next year," she said.

Woah. This year is no benchmark year. Budgets based on a percentage increase over 2005 may be drastically off the mark, unless your disaster forecasting is better than FEMA's (come to think of it, whose isn't, but that's not the point).

If you're in the disaster business, or a regional philanthropy in the Gulf Coast, you've seen some wild swings in giving this year. If you saw big spikes in online giving due to the Tsunami, the hurricanes, and the Pakistan earthquake, please don't count on them happening again in 2006! Without a disaster of those propotions, you'll be lucky to duplicate this year's giving numbers. Your focus needs to be on cultivating those donors, reporting back on the work you've done, and getting a second gift, or perhaps starting them on a monthly giving campaign.

If you've been impacted negatively by the disaster giving to other charities, you may do better next year than this year. You'll be able to focus on your mission instead of wishing your group was in the headlines. And, there are now hundreds of thousands, if not millions of new online donors out there. Some of them also care about your organization, and will be willing to give again, if you can reach them and make your case well.

The future for online giving is bright, but don't get blinded by the spotlight and make a forecast you can't reach.