Returns, Poor Recall May Skew Retail Spending Estimates

In the offline world, it has long been known that consumers are apt to forget the details of their purchasing and tend to overestimate how much they may have spent. The online world is no different according to research by comScore Networks and Yankee Group.

Poor consumer recall and returns of online purchases have led some research firms to question the results of the plethora of online spending estimates that have been released since the 2000 holiday season.

In order to better understand the differences between survey recall data and actual observation comScore administered an online consumer recall survey to a random subsample of its 1.3 million members. In the study, consumers were asked to recall how much they had spent online at a variety of specific e-commerce sites. Their recalled statistics were then compared to what they had actually spent as measured through comScore’s electronic monitoring technology, which captures every purchase at every site. The study identified a substantial gap between shoppers’ recollection and their actual online purchases and site visits.

Overall, consumers over-estimated their past online purchasing by 55 percent. For example, those consumers who shopped at Amazon.com claimed they spent an average amount of $85 per month on that site, while their actual purchases amounted to a lower $67 on average per month. Barnesandnoble.com customers recalled spending $60 per month on average, with an actual purchase amount of $46 per month.

“The results of our study confirm that consumer surveys don’t provide a reliable and accurate picture of consumer online spending,” said Magid Abraham, president and CEO of comScore Networks. “While surveys are an excellent means of gauging consumer attitudes, they fall short in accurately measuring buying behavior — recall is not synonymous with reality. Most people have difficulty accurately recalling what they did in the past, and expecting people to accurately recall hard numbers is wishful thinking.”

According to the Yankee Group, holiday returns for the 2000 holiday season exceeded $1 billion, and return rates for many online retailers are much higher than in prior years — reaching as high as 20 to 30 percent for many retailers. With online sales in the United States exceeding $9 billion for the fourth quarter of 2000, the dollar volume of returns for the holiday season will exceed $1 billion, and could easily approach $1.5 billion.

There are a number of reasons for the higher volume and greater return rates for the 2000 holiday season, according to Paul Ritter, director of Yankee Group’s Online Retail Strategies Planning Service:

  • Online sales for the 2000 holiday season were 70 percent higher than the sales for the 1999 holiday season
  • Online Shoppers “hedged their bets” by purchasing the same product on multiple Web sites, with the hope that at least one of the orders would arrive in time and the one that didn’t would just get returned
  • Shoppers are becoming more comfortable buying products online that have traditionally been bought in stores in which consumers can actually see, touch, or hear the products they are buying. Many of these online purchases aren’t what they were expected to be, so they return the items are returned.

The Yankee Group’s estimates are based on surveys over the past few weeks of online retailers and several returns management outsource providers.

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