Consumers Continue Online Purchases

Despite the fact that 2000 was a year of devastating defeat for many pure-play e-tailers and caution for the investment community, consumers around the world continue to be very satisfied with the online retailing channel, according to a report by Ernst and Young.

The report, “Global Online Retailing”, found that while shoppers were concerned with shipping costs and are price-sensitive generally, the overall number of online buyers continued to increase, spending more on a greater range of merchandising categories. Ernst & Young’s fourth annual special report shows four patterns clearly emerging in 2001 from the ever-shifting picture of online retailing:

  • A multichannel strategy is the key to success today and a critical driver for the future. For anyone who offers consumer products, whether they are retailers or manufacturers, the online channel isn’t just an option — it is an absolute necessity.
  • The same consumer who buys in stores is now buying online.
  • What consumers want to buy online is the same as what they demand in stores, and they expect the same merchandise selection, product quality and brands, and shopping experience across channels
  • Consumers will continue to push companies to make their online technology work the way the users want it to work; and it’s more than just modem speed.

“With the emergence of the retailer you know and trust in your own backyard selling a full range of items across their stores, catalogs and Web sites, we predict the online channel will be substantial,” said Stephanie Shern, Global Director of Retail and Consumer Products for Ernst & Young. “By 2005, it will represent 10 to 12 percent of sales in such categories as apparel, accessories, health and beauty, and toys. In some categories, such as books, music, software, videos, and consumer electronics, it could represent as much as 25 percent of sales.”

The survey sampled 4,400 online buyers in 12 countries surveyed, including 1,400 in the U.S. In 2000, the profile of the average online buyer in the U.S. is moving ever closer to that of the in-store buyer. Sixty percent of online buyers are women, and 59 percent are married. However, in terms of education and household income, online buyers are still somewhat higher than the average on land buyer.

Ernst & Young’s research also shows that online shoppers have every intention of continuing their online involvement. In fact, 87 percent of participating U.S. Internet users indicated they expect to purchase online in the next 12 months.

“To fully realize the great potential of multi-channel retailing, companies must offer an exceptional customer experience,” said Shern. “Customers have very high expectations online–just as they do on-land–and their loyalty is very conditional. Success will depend on having a brand that enables them to meet and exceed customer expectations and improve the customer relationship.”

“In the next few years, ‘branded’ companies have an excellent chance to outdistance the competition,” Shern said. “Consumers will log on in increasing numbers this year, and many will go to the big brand name sites they know and trust. Many companies have strong brands, and that is one of their great advantages. They need to leverage their advantages — even if it means taking the calculated risk of blurring their brands through alliances and other co-marketing ventures — to become truly successful in this still-developing world.”

The list of favorite purchase categories in the U.S. has expanded well beyond the commodity items such as books, CDs, and computers that fueled the early growth of online retailing. While nearly half of respondents indicated they purchased books, computer products and music online, more than one-third have purchased apparel and accessories online. In addition, around one-quarter bought toys and health and beauty aids online during the past 12 months.

Despite the well-publicized customer service failures that plagued some Internet retailers during the 1999 holiday season, a survey by Nielsen//NetRatings and Harris Interactive found that bricks-and-mortar retailers, while making the largest growth in shopping visits during the holiday 2000 season, ranked lower in customer satisfaction than their Internet pure-play counterparts.

The eCommercePulse online survey of 30,000 Web users conducted in December found that among the most visited e-tailing, travel, and auctions sites, customer satisfaction ranked highest among Internet pure plays. Seven of the top 10 sites ranked by customer satisfaction were Web-only companies, with Amazon.com leading with out of 10. The average customer service ranking across 264 sites analyzed was 7.77. Traditional e-tailers making the top 10 included Barnes and Noble, Hallmark, and J.C.Penney. WalMart.com, BestBuy.com, Target.com, Sears.com and BlueLight.com also appeared in the top 20.

“While brick-and-mortar companies have been able to achieve huge growth by bringing their offline customers online, they are also introducing many customers to online purchasing for the first time,” said Sean Kaldor, VP of eCommerce at NetRatings. “By comparison, Internet pure plays have a more established online customer base, one that is more comfortable with the online buying process.”

The survey also found that online sales totaled $7.2 billion in December 2000, with 13 percent of the US population, or 36.1 million people, making an online purchase. For each dollar spent online, and additional $1.97 was spent offline as a result of those online shopping trips, marking a critical advantage for brick-and-mortar companies.

Reprinted, in part, from internet.com’s InternetNews.com.

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