Online Shopping Growing Steadily

A survey of consumers, retailers, and manufacturers done in September of 1998 by Ernst & Young found that online shopping is growing steadily but is still not a mainstream activity.

The percentage of US households that participating in the second annual study that have purchased online rose from 7 percent in 1997 to 10 percent in 1999.

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While credit card security and the consumers’ desire to touch products before they buy have long been cited as barriers to online purchasing, the Ernst & Young survey found a lack of connectivity to the Internet acts as major roadblock. Despite falling PC prices, 57 percent of the households Ernst & Young surveyed do not have a PC. Only 52 percent of the households with a PC were online. Further, only 38 percent of the online households have made an online purchase. Credit card security and the need to see the product are the major reasons cited by online households that do not shop online. Seven percent of the respondents to the survey, both with and without PCs, told Ernst & Young they planned to get connected in the next 12 months.

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Only 10 percent of the consumers surveyed said they use the Web often or all the time to purchase products or services, while 57 percent have researched products or services on the Internet only to buy through fax, phone, or the store.

Ernst & Young found few surprises in the products being purchased. Books, music, computers, clothes, gifts, and consumer electronics lead the way. Ernst & Young attributes the success of these items to several attributes. They are not impulse buys (52 percent of consumers don’t make impulse buys online, according to the survey), they don’t need to be touched (with the possible exception of clothing), and each requires sorting through a massive amount of inventory.

Big-ticket items remain researched online, but purchased offline. These items were researched online by 19 percent of the consumers surveyed, but purchased online by only 2 percent. Even books were researched online but bought offline by 35 percent of the respondents, Ernst & Young found. Almost half (49 percent) of the consumers in the survey researched computer products online, but purchased offline. The study also found that consumers that bought offline were, as a whole, impressed with merchants’ sites.

Retailers on the Web

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The Ernst & Young survey found that online retailers expect the Internet to account for 9 percent of total sales by 2001, up from the 1 percent it represents today. Most retailers are not satisfied with their Web efforts, the survey found. They feel they must be easy to navigate, feature current material, and and interactive.

The survey broke the retailers into “leaders” (those reporting greater than average online success) and “laggards” (those reporting less than average online success). Only one-third of laggards said a strong brand name and selling brand-name products was important compared to 70 percent of leaders. Nearly 25 percent of the retailers participating in the survey had no plans to sell on the Web.

Manufacturers on the Web

[IC_ARTICLE_OBJECT [SHOW IC_Article_ID] “table4”] The majority (57 percent) of manufacturers told Ernst & Young they don’t — and won’t — sell on the Web. Some 15 percent do sell online, up from 9 percent in 1997, and 28 percent plan to sell online.

Smaller manufacturers are more likely to sell online, the survey found, not manufacturers with established retail channels. Nearly all (94 percent) of the manufacturers surveyed have or plan to have a Web site that at least offers information about their products.

Manufacturers, more than retailers, said they have bigger internal hurdles to online success than external obstacles. Insufficient corporate resources and integration with existing business processes were the biggest obstacles, they told Ernst & Young.

“Clearly, manufacturers have a long way to go to fully capitalize on the potential of the Internet market,” said Ernst & Young’s Fred Crawford. “Consumers have confirmed the importance of brand in their online shopping. It is time for manufacturers to more fully include this sales and marketing vehicle in their overall brand strategies.”

The Ernst & Young survey was conducted in September of 1998 among 1,363 consumers, 41 retailers, and 74 manufacturers.