Online Consumer Confidence, Spending Grows

While consumers’ overall confidence in the economy continues to slide, their faith in the Internet seems to be growing, or at least remaining constant, according to new findings by ACNielsen and Yahoo.

The two firms’ quarterly survey of consumer attitudes toward the Internet found that confidence in the medium stayed constant with last quarter – but compared to a year ago, represents an increase of eight points, calculated on an index that began at 100 in mid-2001.

Since then, the Yahoo Consumer Confidence Index – which tracks both Web users and non-users – has risen to 113 points, suggesting that even as economic pressures continue, Americans have a higher opinion of the Internet than previously.

“The eight-point increase in Internet confidence from last year’s holiday season is good news for marketers who are utilizing the Internet for holiday shopping campaigns,” said Travyn Rhall, managing director at ACNielsen International. “Our data indicates that there is a strong correlation between higher confidence and higher consumer spending; marketers should therefore focus on bringing down the perceived barriers to e-commerce, including comfort regarding personal information online.”

In large part, credit for the improvements goes to increasing numbers of broadband users and growing feelings of security when it comes to protecting personal information online, the researchers said.

“The jump seems to be due to greater confidence and security of personal information, as we know that’s been a major issue, and it seems that across many groups, people are feeling more confident,” said Jennifer Dulski, director of e-commerce and marketing at Yahoo. “We’ve seen consumer confidence going down overall, declining over the past 4 months, and the fact that Internet confidence is holding stead and going up since last year is really positive.”

“We think the results bode well for fourth quarter, and point to a growing mainstream acceptance of online shopping as a way to carry out commerce,” Dulski said.

The increased confidence also translates into increased expectations for e-commerce revenues, with consumers indicating that they intend to spend a projected $19.6 billion online during fourth quarter – a 23 percent increase from a year earlier. Average per-shopper spending also is expected to increase, from $225 to $244 per transaction.

Broadband users represent the most-confident consumers, and the highest-spending. The segment has a confidence level of 156, and intends to spend about $287.10 per transaction, the study found. Dialup Internet subscribers, on the other hand, rated about 128, and intended to spend about $210.90 per transaction.

“They find online shopping more convenient, and also they do have more confidence that their credit cards and information will be safe,” Dulski said. “And as more and more people start to get broadband connections, they’ll have an increasingly positive experiences online. In terms of online marketers and sellers, it seems that it really is a good idea to target broadband users.”

More per-user revenue and a growing number of broadband users also could prove positive in another way – helping to offset some of the problems caused by slow growth in the number of people moving online, a fact that seems likely considering that non-Internet users indicated waning confidence in the medium. The index for non-users dropped to 68, down from 84 last quarter, and 69 a year earlier.

The study also found that consumers who have reached higher levels of education tend to be more optimistic about the Internet – a trend that’s increasing. Consumers with at least some college education have an index of 144 points, up 15 percent from last year, while those with lower levels of education rose only 5 percent, to 125 points. Consumers with at least an undergraduate education planned to spend about $75 more than those who reached a high-school level of education.

Such conclusions lend further support to the argument that the average Internet user is better-educated and has a higher income than other demographics – a pitch that many Web publishers are making to advertisers.

Further encouraging news comes from eMarketer, with estimates that U.S. Internet users will increase their annual online spending from an average $866 in 2001 to more than $1,089 by the end of 2002. Also, Shop.org found that the online market grew 21 percent in 2001 and is expecting it to increase 41 percent in 2002, reaching $72.1 billion.

“With the number of online shoppers continuing to grow, U.S. consumers are also spending more online, thereby creating a healthy prognosis for Internet retailers across the board,” says Steve Butler, senior analyst at eMarketer. “One significant result is that online retailers’ customer acquisition costs are falling.”

With the exception of 2001 when spending dropped to $866 from 2000’s $969, the average annual online expenditures among U.S. Internet users (ages 14+) is expected to rise steadily. The firm forecasts $1,249 in 2003 and $1,400 for 2004.

Additionally, the average customer acquisition cost per new customer has dipped from a high of $38 in 1999 to $29 in 2000 to $14 in 2001, according to Shop.org and the Boston Consulting Group. Retailers also reduced expenses by reining-in marketing costs, which fell from $26 per order in 1999 to $12 per order last year.