The die is cast, as shoppers rush to buy gifts online

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This Christmas, Internet users in the US will spend just over $300 online - and another $300 in bricks-and-mortar stores as a result of online shopping.

The six websites shoppers are using most are a mix of traditional retailers with online offerings and Internet-only sites: Amazon.com, eBay.com, Barnes & Noble.com, ToysRUs.com, Yahoo! and J.C.Penney.com.

“This holiday season, a website ceases to be a nice addition or an experimental marketing channel for leading retailers,” said Angela Selden, Andersen Consulting Retail practice managing partner, North America. “Instead, it has become an imperative.”

The battle for consumers’ holiday dollars will be fuelled by the record numbers of shoppers purchasing gifts online this season. According to a new Andersen Consulting study*:
• fifty percent of Internet users in the US plan to purchase at least one holiday gift online, compared with 36% in 1999.
• the percentage of Internet users who will not purchase holiday gifts online this year plummeted from 33% in 1999 to 13%.
• nine out of 10 holiday shoppers (88%) will spend as much or more online this year as they did last year, and 39% predict an increase in the amount of their online purchases.
• eleven percent of respondents will buy more than half of all their gifts online.
• one-fifth plan to purchase an individual gift priced at $200 or more on the Internet, and six percent will make a purchase of $500 or more.

“We’re no longer looking at a slow-growing trend,” said Selden. “For the first time, retailers who haven’t created a compelling web destination may be blindsided by stiff competition from the Internet this holiday season. Next year, the damage could be devastating. We believe that the die is now cast. To be successful, you must be a winner both off- and on-line.”

These findings support those of a recent supply chain study, which found that the frequency of failed attempted purchases over the Internet has dropped to one-third of the 1999 rate. Additionally, the study showed that last year’s service level gaps between eTailers, traditional retailers and catalogers are either closing rapidly or have closed completely.

Trusted names and compelling sites win. Holiday shoppers are not frightened away by the high profile demise of several consumer-focused dot-coms (56% expressed no concern at all). Indeed, consumers said that past success with Internet holiday shopping is keeping them online. Asked about their online shopping during the 1999 holiday season, the vast majority (87%) said they were satisfied with the experience, and only three per cent of respondents cited poor experience as a reason not to shop online this year. But almost one-half (47%) said they would only shop on websites they can trust.

For the first time this year, online holiday shoppers expect to purchase more toys than books. The top five categories are:
• toys 31%
• books 29%
• clothing 24%
• music 25%
• electronics 17%

Half of the respondents (55%) have ideas in mind and will use the Internet to find exactly what they want, but many will go to the web looking for inspiration. In fact, 65% most often find the retailers they use through search engines, and 38% do so by random surfing.

“Websites that are not compelling have now met the ghost of Christmas past,” commented Jeff Luker, Andersen Consulting retail practice managing partner, North America. “For traditional retailers, this provides an additional opportunity and threat: the means to shape consumers’ shopping lists - but only through capturing their interest and attention. This will require understanding their shifting needs. Our research indicates that banner ads, which were highly effective last year in attracting first-time shoppers to a site, have dwindled in effectiveness. In fact, only 22% of survey respondents cite banner ads as an influence in their use of the Internet for shopping this holiday season, but that is the same percentage who cite word of mouth as an influence. Thirteen percent of respondents mention TV and billboards, and six per cent cite news reports. A retailer whose site fails to understand such trends and respond with innovation will find that the holiday season will simply not meet expectations.”

The barriers to Internet use are falling. When respondents were asked why they would not shop online last season, they said that websites require too much information for purchases. That reason is far down this year’s list, following concerns about privacy and security – an indication that shoppers have become more comfortable with the process.

In large part, it is the ease of holiday shopping online that drives consumers to the Internet. The top reasons for shopping online include:
• convenience and ease (73%)
• avoiding crowds (69%)
• saving time (63%)

Top reasons for not shopping online include:
• like to touch/feel products (34%)
• don’t want to pay for delivery (31%)
• enjoy regular shopping (30%)

While price is not a top-tier factor, once online, respondents say it is important in selecting an online retailer (41% of respondents cited finding lower prices over the Internet as a reason for shopping online) and as a basis for comparison shopping (63% said they would use the Internet to compare gift prices).

The use of wireless devices is making its debut this year. According to the survey, only two per cent of respondents used a wireless device, such as a cell phone or personal digital assistant, to shop for gifts in 1999. That number increased to six per cent this year, and one quarter (nearly 27%) said that, if wireless devices offered the accessibility and product selection of the Internet, they would consider using them to make purchases.

Commented Luker, “We believe that as consumers become increasingly comfortable with mCommerce, the numbers of shoppers using wireless devices will expand dramatically. mCommerce holiday shopping will be a greater factor next year, and retailers need to begin planning now for that shift.”

*The survey, fielded by Andersen Consulting in November 2000, was conducted among 1,967 US residents, 18 years of age or older, who have shopped for products and/or services over the Internet. The survey was conducted entirely online.

About Andersen Consulting
More than 65,000 people in 48 countries deliver a wide range of specialized capabilities and solutions to clients across all industries. Under its network of business strategy, the firm meets a full range of client needs - consulting, technology, outsourcing, alliances and venture capital.

Andersen Consulting

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