October 30th, 2011 | 3 MIN READ

Virtual Goods Mean Real Money This Holiday Season

Written by Amanda Dhalla

As head of consumer research with Elastic Path’s Research and Strategy division, Amanda Dhalla helps global enterprises like Google better understand consumer behavior in order to optimize their digital offerings. Amanda’s research has been cited by CNN, Econsultancy, Smart Money, and Internet Retailer. A seasoned ecommerce professional with more than 14 years in the field, Amanda has hands-on experience marketing, merchandising and managing multimillion dollar online stores. Her areas of specialization range from market research, conversion optimization and analytics to traffic generation tactics such as social media, search engine optimization, and content marketing.

Amid economic uncertainty in the U.S., many shoppers will hold back on spending this holiday season. Research firm Kantar Retail predicts that overall retail sales will increase just 2.8%, half the 2010 rate. E-retail sales will grow 13.5% compared with the 16.5% increase registered last holiday season.

Within this subdued holiday outlook, shoppers planning to purchase virtual products – ebooks, game downloads, Facebook credits, and the like – are a bright spot, according to Elastic Path’s latest research Virtual Goods Mean Real Money This Holiday. Download a free copy of the full research report.

27% of holiday shoppers plan to buy digital gifts

Of the 1,012 holiday shoppers surveyed, 27% intended to buy digital gifts this November and December. As early adopters of consumer electronics and active digital purchasers, younger (ages 18-34) shoppers are much more inclined to buy digital goods than the average consumer. And men find virtual gifts more appealing than women do. Holiday shoppers buying digital gifts 2011

Digital shoppers will spend more in a ho-hum holiday forecast

Over the past several months, U.S. consumers have experienced wild fluctuations in the stock market, high unemployment, and mounting government debt. As a result, many Americans will limit their spending this coming holiday season. Only 15% plan to spend more than they did last year. 47% will spend approximately the same amount, and 20% will spend less. In stark contrast to the average holiday shopper, a whopping 30% of virtual goods buyers plan to spend more than in 2010 on gifts of all types, both physical and digital, with only 13% spending less. Holiday shoppers spending intentions 2011 Those purchasing digital goods also have bigger gift budgets—$440 on average, 40% more than their non-digital counterparts. Holiday shoppers' gift budgets 2011

Attract the digital gift shopper to maximize sales

The above figures indicate that digital content leaders like Amazon and iTunes will be pulling in big sales this holiday season. But with the digital goods market expected to swell to $36 billion by 2014 according to industry analysts at GigaOM Pro, attracting the virtual gift shopper is increasingly important to maximize sales, even for ‘traditional’ brands. Toy creators like Mattel, Lego, and Crayola are great examples of companies jumping in with both feet into the digital market. By creating “app-cessories” – that is, physical items that interact with Apple gadgets – they can lure techno-parents.

Crayola ColorStudio HD includes a stylus that writes like a crayon on the iPad:

Lego’s Life of George game integrates real bricks and an iOS app: Lego Life of George

And if you don’t yet make or sell digital goods, or items transcending physical and digital spaces, it’s not too late to consider adding third-party apps or digital subscriptions to your ecommerce site – sold with physical products, or as up-sells. Or giving away small amounts of Facebook Credits to use in popular social games like FarmVille as rewards to loyal customers or those who sign up for emails.

Interested in more details?

The paper offers other recommendations to help retailers and e-tailers attract digital shoppers including maximizing visibility in search and social networks, working towards developing a single view of the customer across all channels from mobile/web to retail, cross-merchandising digital and physical items, and expanding gifting and payment options. Download a free copy of the full research report Virtual Goods Mean Real Money This Holiday.