Online Shopping a Tough Sell for Online Retailers

A study of more than 4,000 Web users by Brigham Young University (BYU) found that Internet retailers need to re-target their marketing, address customer fears over credit card security and make the experience less technologically challenging.

The study, which was funded by IBM, identified the shopping behavior of eight online consumer types and discusses which types would respond to marketing efforts designed to increase e-commerce sales. Segmentation studies focusing on the Internet have been very popular with commercial researchers hoping to break the ever-broadening Internet audience into groups marketers can better understand.

“Other segmentation studies have been done by commercial research companies, but they focus on demographics like age, income and location. They scarcely look at the lifestyles or attitudinal characteristics that are the true identifiers for the way people behave,” said business management professor William Swinyard, who conducted the study with fellow BYU professor Scott M. Smith.

“In this study we track not only the actual amount of online purchasing people do, we profile individuals using a broad variety of computer literacy and lifestyle variables directed at understanding the psychology of online shopping,” Smith said. “We anticipate that somewhere between 65 and 70 percent of all people on the Internet have the potential to become online shoppers, with excess of 40 percent someday shopping regularly.”

The study divides shoppers and non-shoppers into eight segments: Shopping Lovers, Adventurous Explorers, Suspicious Learners, Business Users, Fearful Browsers, Shopping Avoiders, Technology Muddlers and Fun Seekers. Of the eight, Fearful Browsers represent the largest untapped opportunity for e-retailers to win online shopping converts, while Technology Muddlers and Fun Seekers should probably be avoided, the study found.

BYU E-Commerce Segmentation Study

Here’s a closer look at each of the eight groups:

  • With 11.1 percent of the market share, Shopping Lovers enjoy buying online and do so frequently. They are competent computer users and will likely continue their shopping habits. They are also important because they spread the word to others about joys of online shopping whenever they have the opportunity. They represent an ideal target for retailers.
  • Adventurous Explorers (8.9 percent) are a small segment, but it presents a large opportunity. They require little special attention from Internet vendors because they believe online shopping is fun. They are likely the opinion leaders for all things online. Retailers should nurture and cultivate them to be online community builders and shopping advocates.
  • Suspicious Learners (9.6 percent) comprise another small segment with growth potential. Their reluctance to purchase online more often hinges on their lack of computer training, but they are open to new ways of doing things. In contrast to more fearful segments, they don’t have a problem giving a computer their credit card number. Further guidance and training could help turn them into online buying.
  • Among the most computer literate, Business Users (12.4 percent) use the Internet primarily for business purposes. They take a serious interest in what it can do for their professional life. They don’t view online shopping as novel and aren’t usually champions of the practice.
  • Fearful Browsers (10.7 percent) are on the cusp of buying online. They are capable Internet and computer users, spending a good deal of time “window shopping.” They could become a significant buying group if their fears about credit card security, shipping charges and buying products sight unseen were overcome.
  • Shopping Avoiders (15.6 percent) have an appealing income level, but their values make them a poor target for online retailers. They don’t like to wait for products to be shipped to them, and they like seeing merchandise in person before buying. They have online shopping issues that retailers will not easily be able to overcome.
  • Technology Muddlers (19.6 percent) face large computer literacy hurdles. They spend less time than any other segment online and show little excitement about increasing their online comfort level. They are not an attractive market for online retailers.
  • Fun Seekers (12.1 percent) are the least wealthy and least educated market segment. They see entertainment value in the Internet, but buying things online frightens them. Although security and privacy issues might be overcome, the spending power of the segment suggests that only a marginal long-term payback would be possible.

For the purposes of the study, shoppers were defined as male or female household heads with home Internet access who made an online purchase from November to December 2000. Online non-shoppers maintained the same characteristics, except they did not make a purchase during those months.

The BYU researchers found that the average online household checks or sends email messages 2 to 3 times a week, visits Internet sites for hobbies or to play games once a week and visits auction sites 2 to 3 times a month. About 35 percent of online households buy clothing online, 28 percent buy books and magazines and 23 percent buy music; less than 10 percent buy flowers, tickets or pay for travel.

People like the Internet because it allows them to preview products and get product reviews and recommendations, it provides the convenience of home delivery and removes the hassle of having to drive to go shopping, the study found.

As for dislikes about online shopping, the study found similar complaints to most other e-commerce studies: shipping charges, the difficulty of judging the quality of merchandise, the hassle of returning unwanted items and the possibility of credit card numbers being stolen.

The study, which was also funded by a J.C. Penney Co. Inc. endowment to BYU’s Marriott School of Management, consisted of three focus groups, 40 one-on-one interviews that defined themes of Internet usage, a questionnaire administered to 222 college students about their satisfaction and dissatisfaction with the Internet, 4,000 detailed questionnaires mailed to individuals in 50 states and a second nationwide survey emailed to 20,000 Internet users.

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