E-Tailers Get Good News and Bad News

The 2000 holiday season was characterized by greater spending, higher levels of satisfaction, but also considerable latent demand and continuing purchasing problems, according to research by The Boston Consulting Group (BCG) and Harris Interactive.

While 51 million US consumers purchased a gift online during the 200 holiday season and the average amount they spent increased 62 percent over 1999, another 16 million shoppers attempted to purchase online but failed

“Two stories have emerged this holiday season. On one hand, we’ve seen very positive results — there was a greater number of shoppers, who spent more and who were increasingly satisfied with the experience,” said Lori Iventosch-James, director of e-Commerce Research for Harris Interactive. “Yet, online retailers failed to capture the more than 16 million consumers who attempted to buy a holiday gift online, but couldn’t complete the purchase. These consumers represented $1.5 billion in potential sales — and a missed opportunity few retailers can afford.”

By the end of the 2000 holiday shopping season, the number of consumers who had purchased a gift online increased 28 percent from the 1999 holiday season. Almost half of these consumers, 23 million, were buying holiday gifts online for the very first time. On average, online holiday shoppers spent $276 online — 43 percent more than they had anticipated on spending going into the holiday season, and 62 percent more than the average online holiday shopper spent in 1999.

Satisfaction with the online shopping experience this last holiday season also increased, despite continuing frustrations with the purchasing process. Eighty-two percent of online purchasers indicated that they were satisfied with the experience, up from 76 percent the year before. But roughly half of purchasers experienced a purchasing problem of some kind in 2000, a similar proportion of purchasers who had experienced problems in 1999.

“Our survey shows that in the 2000 holiday shopping season, site navigability and ease-of-use was less of a concern for consumers,” said Michael Silverstein, BCG senior vice president and leader of the firm’s Consumer Practice. “Back-end operations, however, continue to pose a significant challenge for online retailers. Most consumers who experienced a purchasing problem expressed a continuing frustration with finding out that the product they ordered was out-of-stock and approximately five percent of gifts ordered did not arrive in time for Christmas. That’s a very high number and not excusable. The lost order has become the difference between the winning online vendors and the losers.”

Online consumers have also become more selective in where they buy their holiday gifts. According to the survey, they shopped in fewer categories and on fewer sites during the 2000 holiday season than they did in 1999. Most holiday shoppers in 2000 shopped in only two different product categories, compared to three categories the year before.

“This holiday season, we’ve seen a real flight to quality as consumers have concentrated their online spending to a smaller number of retail sites,” said Peter Stanger, BCG vice president and topic leader for Business-to-Consumer E-Commerce. “Consumers are increasingly loyal to brick-and-mortar sites and the few pure-plays with extremely strong brands. This trend should last well into 2001 and beyond.”

Looking forward to the 2001 online retail year, the survey found that online demand will continue to be strong. Already, 18 percent of online holiday shoppers have also taken advantage of many of the post-holiday online promotions, spending an average $128 each on sale items in the weeks following Christmas. Thirty-nine percent of the online population also intend to purchase more online in 2001 than they did last year.

The Harris/BCG findings were obtained from an online survey conducted from Jan. 3 to 9. The quantitative survey was completed by 2,107 Internet users over the age of 18 who live in the US, selected from Harris Interactive’s panel of more than seven million respondents.

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