ERNST & YOUNG: “GLOBAL ONLINE RETAILING REPORT” SURVEY FINDINGS
According to the Ernst & Young “Global Online Retailing” report, in the United States, the clear world leader in online shopping, 39 million people shopped online in 1999, up from 17 million in 1998. According to the same report, in Europe, 8.3 million people shopped online in 1999, up from 5.2 million in 1998.
Based on report findings, the main reasons that non-buyers don’t buy online are:
Uncomfortable sending credit card information
Prefer to see product before purchasing
No existence of credit card
Can’t get enough information about products to make decision
Not confident with online merchants
Can’t talk to saleperson
In addition, the main concerns of the online buyers are:
Shipping costs too high
Need to try on for fit
Prices are too high
Not appropriate for large items
Not appropriate for luxury items
Want to see/feel them
Not appropriate for perishable items
Concern credit card information can be stolen
As far as retail companies is concerned, Ernst & Young “Global Online Retailing” report, reveal the main sources that companies anticipate future growth: new customers, new categories, alliances, new channels, acquisitions, international expansion.
Furthermore, virtual retail companies use the following methods to attract new traffic to their sites: portals/online ads, media TV/radio, print ads, cross-channel marketing, direct mail, e-mail, special events, special incentives.
NETIZENS READY TO SPEND ONLINE
In its latest eHoliday Shopping Report, eMarketer estimates that online buyers will spend an average of $280.27 this season, a 30% increase over 1999. The report also aggregates several other estimates of average spending per buyer -- the highest being American Express' estimate of nearly $600. Note that Forrester research counts only the last five weeks through December 25 in its estimate. Additionally, Jupiter Media Metrix, counting only November and December as the holiday period, forecasts average online spending to be roughly $331 per person. eMarketer forecasts that online holiday spending will reach $12.5 billion in 2000. Other estimates range from $19.2 billion (Computer Economics) to $6 billion (BizRate.com). These estimates vary primarily because of different definitions of e-commerce and different periods considered for the holiday season.
How many buyers will it take to make these predictions come true? eMarketer estimates that 45 million consumers will make purchases online during this quarter -- 81% of all online buyers for the year. There are a few other research estimates:
- NPD Group expects 54 million consumers will purchase at least one item online
- According to Pricewaterhouse Coopers, over 75% of internet users will shop online for holiday gifts -- and of these browsers, 85% will make purchases Jupiter Media Metrix predicts 35 million US consumers will buy gifts online, up from 20 million last year.
The NPD study, furthermore, points to a high number of repeat customers -- 69% of sites from which consumers intend to buy, will be ones they bought from in the past. NPD Group study also points that US shoppers will spend $12.5 billion online this holiday season (November and December 2000) and 80% of all users will go online for gift ideas.
Assumptions about unlimited e-retail growth have generally been curbed during the past year. But despite the gloomy predictions, most researchers agree that this holiday season will find many shoppers still buying online.
According to PriceWaterhouseCoopers, 27% of Internet users have begun to peruse the web for holiday items. 25% have actually purchased items online.
THE SEASON OF EGIVING
It is no surprise that gifts and flowers are one of the better revenue-generating online retail categories. But while eMarketer's new eHoliday Shopping Report projects e-tailers will amass a record $12.5 billion this fourth quarter, gift buying is not just a year-end ritual.
Produced by eLTRUN () Edited by Adam Vrechopoulos (tel: +301 8203663, e-mail: )
Electronic Retailing & eMarketing, Issue 5, September – October, 2000 (page 1)
After the 1999 fourth quarter holiday season, e-tailers geared up for Valentine's Day and held their virtual breaths until the next onslaught of gift-giving holidays: Easter, Mother's Day, and Father's Day. Nielsen/NetRatings found an increase in traffic to Valentine-related sites during the week ending 6 February 2000 compared to the week ending 30 January 2000: 88% for gift sites, 78% for lingerie sites, and 32% for flower sites.
These findings are similar to those of a separate study, by BizRate.com, which had forecast an estimated 6.5 million Valentine orders yielding $642 million in sales by Valentine's Day, 2000. More than 50% of online shoppers told BizRate that they intended to buy online for Valentine's Day. They also revealed what they were getting for their loved ones.
Mother's Day contributed to a significant increase in flower sales, jumping from $54 million in April 2000 to $72 million in May 2000. Currently, the gifts and flowers market is worth nearly $40 billion in US sales, according to various industry sources.
eMarketer projects that online sales of gifts and flowers will continue to grow through 2004. Sales for 2000 will exceed $1.3 billion and more than double to $3.2 billion in four years.
Forrester Research projects online flower sales will rise by more than 50%, from $354 million in 1999 to $550 million in 2000. By 2001, flower sales will reach $1 billion. Sales in both flowers and specialty gifts will continue to increase so that by 2004, revenue generated will reach $2.5 billion and $1.4 billion respectively.
Top business executives are increasing their use of online shopping as a way to complete their holiday gift buying commitments. CEOExpress.com, a website for senior executives, reported that about 92% of the executives it surveyed purchase more gifts online. Almost 72% indicated they are buying gifts for family and friends, rather than shopping for business associates.
The story is different, however, for online gift certificates. A study commissioned by CyberSource found that only 23% of respondents had purchased gift certificates online. As much as 70% of those who have never purchased a gift certificate online cited a low level of satisfaction with current online gift certificate offerings. In addition, 86% of all online buyers believe that a graphically-rich electronic or traditional paper gift certificate has greater gift-giving value than a text-based email certificate.
AMERICANS -- TWO-FISTED MEDIA USERS
According to a recent NFO Interactive/Burke Inc. study, wired Americans spend 3.8 hours a week watching televesion while online. NFO and Burke also note that even when not done in conjunction with one another, there is still a close relationship between Internet usage and Television viewership. Likewise, heavy, moderate and light television watchers spend a similar amount of time online.
NFO/Burke also found that broadband users average 5.0 hours per week simultaneously online and watching TV -- compared to users with dial-up access who averaged only 3.7 hours surfing and viewing. High-speed users spend an average of 15.9 hours per week watching television while their dial-up counterparts spend 17.4 hours per week. However, only 16% of respondents report having high-speed access.
TOY SITES PLAY PRIVACY GAMES
ClickSure.com reports that nearly 50% of the top 10 toy sites do not post their privacy policies in an easily accessible area of the purchase process. ClickSure also found that 70% do not identify the personal information being collected. 30% of the sites do not provide users with a clear statement on the use of cookies and 20% do not give a specific purpose for which the personal information supplied will be used.
US: WHERE THE WEB SHOPPERS ARE
According to a recent report by The Conference Board and NFO Worldwide, 34% of American households have made an online purchase in the past year -- up 24% from last year. Young adults (ages 25-34) represent the biggest online shopping group, with 55% buying online this year. Consumers ages 35-44 represent the second most active market with 45%; those ages 65 and over are the smallest market, with only 10% buying online this year.
The Conference Board/NFO also reports the latest online purchases by household income. Although the top income bracket shows the highest increase in online purchase activity (up 13%), the second most substantial increase in online purchases occurred in the $25,000-$34,999 household income bracket (up 11%).
Conference Board/NFO notes that the Pacific region of the US supports the highest level of online shopping activity, with 42% of the region engaging in e-commerce.
HERMES is a Human Network on Electronic Retailing. It is partially funded by the Greek Secretariat of Research and Technology (GSRT) and managed by eLTRUN ()
Electronic Retailing & eMarketing, Issue 5, September – October, 2000 (page 1)
The Mountain states follow closely behind with 38% shopping online, followed directly by the East and West-North Central regions with 35%. The New England region has the smallest amount of online shoppers: just 29%.
The report also charted the 3 biggest "barriers" consumers feel hinder their online shopping experience: price, security and ease of navigation. More than one-half of consumers are still looking for the best prices online.
eMarketer forecasts the average annual online expenditure of adults ages 18+ will increase from $705 in 2000 to $1,130 in 2003.
#1 Online Bookstore Is...
The latest PowerRankings survey by Forrester Research reports that Borders.com rates first in online booksellers over Amazon.com. Forrester analysts measured consumer opinion and awarded Borders.com a score of 66.83 and Amazon.com a score of 66.67.
EARNING CUSTOMER ELOYALTY
Customer loyalty is a key driver of profitability for both online and offline companies. According to a study by Bain & Co. and Mainspring, the more often a customer visits a site, the more likely a customer is to spend an increasing amount of money, and thus generate profits for the e-tailer. For instance, in apparel, the average repeat customer spent 67% more overall in the third year of his or her shopping relationship with an online vendor than in the first six months. And, over three years, customers referred by online grocery shoppers spent an additional 75% of what the original shopper spent.
Internet retailers relying on customer loyalty should beware, however -- their customers will jump ship if they do not heed other factors. Jupiter Media Metrix finds that 75% of online consumers who participate in loyalty programs say they are not what motivates them to make online purchases. Instead, e-commerce providers should fill functionality gaps or face losing customers to competitors. Only 22% of 1,200 online consumers said loyalty programs served as an incentive to buy online.
Jupiter argues that loyalty programs must go beyond giving out points and should reward loyalty with improved service such as priority service, personalized offers, or e-mail updates. This was further underscored by the survey data, which emphasized customer concerns about service:
- 72% of respondents said that customer service is a critical factor in shopping satisfaction
- Only 41% indicated they were satisfied with the service they had experienced
Even consumers who participate in loyalty programs don't evince a high degree of enthusiasm -- only 35% belong to more than three programs.
A recent Gomez study reports that 88% of online e-tailers have prioritized customer service for the 2000 holiday season. 77% of firms consider on-time delivery a main priority. 85% of pure-plays and 88% of click-and-mortars will indicate a "last day to shop" on their site. Companies believe these efforts will help them capitalize on an estimated $11.4 billion market this holiday season.
One way e-merchants attempt to lure new customers is through online coupons. eCoupons are now 10% of all coupons used, up from 5% in the fall of 1999. So says the NPD Group, which also concludes that 27% of people online are using e-coupons, down slightly from the peak usage of 30% during the year-end holiday season.
Jupiter finds that 73% of consumers typically wait for discount promotions to appear before making a repeat purchase at a particular e-tailer. Use of such promotions rose during Christmas week in 1999, as 42.2% of respondents to a Roberts Stephens poll indicated that they used a coupon with their purchase online.
Use of e-coupons are most popular among grocery shoppers. Other categories associated with e-commerce, such as toys, books and music, are among the e-coupons most frequently redeemed through any sales channel. The NPD Group found that 59% grocery shoppers use online coupons, and nearly half as much redeem online coupons for books and health-related products.
Redemption locations for online coupons differ depending on the category. eCommerce category coupons tend to be redeemed online more frequently than other coupon categories. NPD found that toy e-coupons posted the highest online redemption rate at 87%, followed by books at 83%.
WEB ADVERTISING:
NOT JUST CLICKTHROUGHS ANYMORE
According to the new Q3 2000 Online Advertising Report from AdKnowledge, 61% of websurfers who click through an advertisement are "converted" (AdKnowledge defines a conversion as a purchase, registration or request for information). As time elapses, the clickthrough-to-conversion rate drops.
In fact, AdKnowledge reports that 32% of all conversions happen after viewing an ad without clicking through. The report also notes that the number of websites seeking advertising has increased by 35% over Q3 -- a 22% rise since the previous quarter.
ELTRUN is the eBusiness Center of Athens University of Economics and Business (AUEB)
Electronic Retailing & eMarketing, Issue 5, September – October, 2000 (page 1)
EUROPEAN USERS: THE MORE THEY SURF, THE MORE THEY'LL SHOP
According to Jupiter Research, by 2002, 51% of online Western Europeans will be internet veterans. Jupiter reports that the number of people online in the six strongest internet markets (UK, Germany, Denmark, Sweden, France, Finland) will increase by 85.6 million over the next five years.
Jupiter charts the progression of Internet penetration over the next few years in terms of three Internet experience levels. "Veterans" have been online for more than two years, "intermediate" users have been using the net between one and two years and "newbies" are those who have been using the internet for one year or less.
Jupiter also notes that online shopping in Europe depends on Internet experience: 11% of newbies and 41% of veterans have purchased something online. Additionally, 34% of users who have been shopping online for one year or less have spent less than EUR100 in the past year -- only 13% of those with two or more years experience spent the same amount. However, 25% of experienced shoppers have spent EUR1,000 or more in the last twelve months, compared to 12% of inexperienced shoppers.
Finally, according to an ActivMedia survey, online sales for the B2C market will reach $1.1 trillion by 2010. Respondents predict that online sales for 2000 will total $56 billion -- a 103% increase from last year.
INTERNET PENETRATION IN WESTERN EUROPE
According to NetValue, 50% of Denmark's households are online. Spain has the same number of wired households as Denmark, although they represent only 12.7% of all Spanish households.
Due to a low percentage of online households, 46.2% of which have been online for less than one year, NetValue categorizes Spain as an "emerging internet market". Likewise, the following gender breakdown of each country studied shows the lowest percentage of female users, 35.4%, are in Spain.
NetValue notes that Denmark also takes the lead in e-mail usage; 71.8% of online Danes are using e-mail, as are 66.3% of wired French and 64.3% of Spanish users. Percentages are slightly lower in the UK and Germany -- 60.6% and 51.2% respectively.
IS LIVE INTERACTION READY
FOR PRIME TIME?
Online businesses unmistakably want to augment their customer relations with everything from instant messaging to real-time online voice conversations, as studies, analysts and experience have convinced the industry that high-tech customer service is key for retaining customers.
However, poorly instituted live interaction has the potential of alienating more customers than it would help, leaving companies treading very gingerly toward implementation.
A study this year by Datamonitor found that U.S. businesses lost more than $6.1 billion (US$) in potential Internet sales in 1999 because of poor online customer service, and estimated that an industry-wide failure to resolve the problem could lead to at least $173 billion in lost revenues through 2004.
Additionally, Datamonitor reported that 7.8 percent of online transactions initiated by consumers are abandoned because of poor customer service. Obviously, no one thought that sub-standard customer service was a boon for business. But until relatively recently, few companies seemed to realize just how negative the impact could be.
The general course of action seems obvious -- get live interaction. However, Datamonitor, estimates that only 3 percent of e-commerce Web sites currently use live chat. Live interaction becomes an e-tailer's highest profile human interaction with a customer, meaning that everything has to be tuned to a perfect pitch.
Additionally, customer service agents, whose previous role has chiefly involved the telephone, must now be able to incorporate the typing, spelling and grammar skills to handle real-time interactive chat with restless consumers.
Finally, and perhaps most crucially, the revamped customer service must integrate seamlessly not only with the company's existing Web site, but the company's entire operations, online and offline.
The Web site of brick-and-click apparel retailer Lands' End -- which in September 1999 became one of the first companies to institute live interaction -- offers perhaps the preeminent online model.
Lands' End Live offers several customer service capabilities, starting with the option of instant chat from a service agent. That agent can not only answer questions, but also make shopping recommendations -- causing single or split-screen Web pages to open right up on the customer's browser.