The consumer direct channel, which includes catalogs, direct mail, interactive television and online, will generate one of the largest scale shifts in economic history, accounting for 12 percent of all US retail sales by 2010, according to a study by Peppers and Rogers Group and Institute for the Future.
The study, “Consumer Direct: Shopping Behavior in the Age of Interactivity,” found that the consumer direct (CD) channel will be an increasingly important source of information and assistance for shoppers making purchasing decisions. As a result, by 2010 the CD channel is likely to affect more than 24 percent of all US retail sales. Total CD revenue leaped from $115 billion in 1998 to $133 billion 1999, accounting for nearly 5 percent of retail sales.
“The increasingly hybrid nature of shopping is blurring the lines between traditional and consumer direct sales channels,” said David Halek, director of the project at Peppers and Rogers Group. “The critical factor in defining a CD transaction is where the goods are ultimately purchased, not where they’re delivered or picked up. Consumers are learning to bundle Consumer Direct and bricks-and-mortar shopping experiences to make their buying decisions so even though a purchase may occur at a local store, the actual product selection might take place online or through a catalog.”
According to the study, 83 percent of US consumers made a purchase through direct-to-home shopping channels during 1999, and 25 percent of this group bought products online. Through 2010, within the CD channels there will be a dramatic shift toward online activity, despite a healthy pace of shopping in offline channels, such as catalogs and direct mail.
The study also found that all is not lost for the staunch traditional catalog shopper. As much as 20 percent of non-CD shoppers are interested in catalog shopping in the future, which suggests continued growth in catalog shopping for some time.
“Consumers continue to integrate multiple Consumer Direct channels into their shopping mix, maintaining their use of traditional CD venues and adopting new channels like the Web,” said Katherine Kress, Director of Institute for the Future. “Now, more than ever before, companies must understand consumer shopping behavior across channels to target effective marketing messages.”
Brick-and-mortar retail establishments will respond in force to the rapid growth of remote shopping and the dramatic impact the CD channel will have on their businesses by improving their offerings and the convenience of shopping at their stores. The Consumer Direct study indicates that a significant part of a revitalized bricks-and-mortar strategy will be to link physical stores more closely with the CD channel.
“Companies need to establish and maintain a presence in multiple channels – stores, mail, catalogs and online,” Halek said. “They also must have consistent messages across channels and treat an individual customer consistently no matter where he shops.”
With an increasing integration between the physical and virtual worlds, the study found that CD companies will give consumers more choice and control in their purchasing decisions through interactive and collaborative learning relationships that enhance customer loyalty.
“The hybrid nature of shopping will make it more important than ever for companies to build learning relationships with their customers that will enable them to offer personalized information and options across all channels,” said Martha Rogers, Ph.D., Partner of Peppers and Rogers Group. “Consumer Direct companies that grow smarter about an individual customer over time can make it easier and easier for her to shop at that company, and will be able to deliver services to her unavailable to her from competitors, since those services will be based on that customer’s feedback.”
Other findings of the survey include:
- Interest in automatic replenishment among the most sophisticated group of CD shoppers ranges from 40 percent for household items to 60 percent for prescription medicines. Automatic replenishment services can either remind the consumer about items they are likely to run out of soon, or can automatically purchase and send the items the consumer needs. Consumers generally are more interested in a automatic replenishment model in which they maintain control by receiving a reminder of items they are likely to run out of soon and have the opportunity to accept or decline shipment of that item.
- Consumers are coming to expect companies to deal with them as one customer across all channels. Drugstore shoppers are the most likely group to search for an item online but complete the purchase in a store or on the phone.
The survey also found that increasing numbers of US consumers are trying CD channels for the first time for many reasons, including:
- Unique Items — 72 percent of catalog/mail shoppers and 50 percent of online shoppers said one of the top two reasons they tried the channel for the first time is because it offers items they cannot find at stores.
- Free shipping — 35 percent of catalog/mail shoppers and 24 percent of online shoppers were also enticed by free shipping offers.
- Time savings — 84 percent of consumers who have tried online grocery delivery services such as Peapod said that one of the top two reasons was to save time shopping.
The Consumer Direct study, led by Martha Rogers and Greg Schmid of Institute for the Future, surveyed 2,500 households and included interviews with leading catalogue, Web and online grocery shoppers.
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