A comprehensive, three-part Ernst & Young study reveals that while industry experts continue to focus on sales predictions as the key indicator of Internet commerce, they are overlooking the Web’s unmatched power in driving consumer purchases to other channels of distribution. The study also highlights the Internet’s potent ability to influence sales of a wide growing range of products and services.
“Internet Shopping,” a special report produced by Ernst & Young and the National Retail Federation, reveals that nearly one-third of consumers (32 percent) with online access have purchased products or services on the Internet. Yet, only four percent make more than 10 purchases a year. Sixty-four percent of those with Internet access research products online and later buy them through traditional channels — double the percentage of consumers who research and buy the same products online. Overall, 90 percent of consumer respondents said their online research is valuable to future purchasing decisions.
“The Internet is much more than a passive advertising vehicle,” said Stephanie Shern, Vice Chairman, Industry Services of Ernst & Young. “Our research shows that the Internet appears to be accelerating purchase decisions. Retailers and manufacturers must understand this to unlock the incredible value of the Internet.”
Try It… You’ll Like It
Findings suggest that Internet shopping satisfaction continues to grow among a majority of Web purchasers. Fifty-six percent said they like the Internet’s ability to offer comparison shopping, 52 percent are happy with online merchandising, and 50 percent enjoy the ease of navigation and the overall speed of process on the Web.
Clearly, the main reason consumers shop on the Internet is the convenience (53 percent) it provides. At the same time, a large percentage of Web purchasers said that variety (46 percent) and cost savings (45 percent) were key factors in buying on the Internet. Internet security remains the biggest hurdle to prospective Web purchasers, with almost 70 percent reporting that they are uncomfortable sending their credit card number through cyberspace. Yet, satisfaction appears to grow with experience, as 52 percent of current Web buyers said they are happy with credit card security.
“As retailers search for new and innovative ways to expand their markets and keep their customers happy, they will look increasingly to cyberspace for ideas and answers,” said National Retail Federation President Tracey Mullin. “As the Ernst & Young study indicates the sky’s the limit for this exciting channel.”
Neither Nerd Nor Neophyte
Dispelling a popular myth, the cyber-shopper profile is neither a teenager nor a computer “nerd.” Instead, findings indicate that Web buyers are well-educated, well-paid, and in their prime earning years; 64 percent of online shoppers are between 40 and 64 years of age. Sixty-eight percent of online shoppers are male. “Many retailers should take keen notice of these findings as these demographics represent their ideal online customer,” added Shern.
Cyber-shoppers also have active lifestyles with numerous hobbies. Fifty-one percent are avid moviegoers, 48 percent are gardeners, 36 percent do some kind of charity and volunteer work, and 32 percent attend concerts, plays and museums. On the whole, Web shoppers engage in these activities more frequently than consumers.
The Internet is having its most profound impact upon men, who seem to have found a shopping channel uniquely suited to their needs. Men outnumber women as primary PC users by a five-to-three margin and spend more time online than women. Eighty-three percent of men with Internet access go on-line on a regular basis, compared with 64 percent of women. “Most women still prefer more traditional shopping channels,” continued Shern. “But because they are often loyal to both brand and style, a clear opportunity exists in such brand-driven areas as apparel and consumer electronics. Web sellers need to heighten their marketing and sales efforts towards women.”
The New Millennium Great Expectations Among Retailers & Manufacturers
Both retailers and manufacturers are extremely optimistic about the growing importance of the Internet as a future sales channel. By the year 2000, half of online sellers expect to generate at least 20 percent of their total sales on the Web.
Retailers are extremely optimistic on the profitability of their Web sites, with more than two-thirds (67 percent) predicting profitability in the first year of operation. A staggering 81 percent of retailers project profitable Web sites within two years. Manufacturers are more cautious than retailers with only 40 percent expecting profitability on their sites within a year of operation.
Fifty-four percent of retailers have established an online presence for marketing and image development but have no plans to utilize the Internet as a sales medium citing the unsuitability of their products for Web sales.
Sixty-nine percent of retail respondents viewed market expansion and 61 percent believed customer retention are the two primary goals of having an online presence. Fifty-eight percent said the Internet has allowed them to differentiate themselves from their competition and to expand their market. “Retailers should use the Internet to drive sales, reduce costs and bolster marketing efforts,” stated Shern. “Our study shows that brand names and retailer familiarity exert the most impact on Web buying decisions. Retailers need to be well positioned for the time when the Internet becomes a mature sales opportunity.”
Judging by manufacturers’ plans, direct-to-consumer online sales do not pose an immediate threat to retailers. Only nine percent are currently selling products on the Web and 12 percent more have plans to begin to sell. The majority (71 percent) have no intention of selling online.
What’s Hot & What’s Not
Some products may be better suited for online sales than others. Information intensive items such as computers, software, books, travel, music, and magazine subscriptions are the most popular online products at present. Apparel is emerging as a viable online category.
The study conducted comprehensive interviews with 850 consumers, 150 retailers and 150 consumer products manufacturers about their current and future Internet buying and selling activities.
Ernst & Young LLP provides assurance and advisory business services, tax services and consulting solutions for domestic and global clients. The firm has 27,000 people in 89 U.S. cities. Visit the Ernst & Young Web site at .Details