U.S. consumers are becoming more and more comfortable shopping online. And they’re spending more – particularly on clothes and luxury items.

eMarketer predicts consumers will dramatically increase their spending at online retail shops from $877 per consumer in 2005 to $1,512 per consumer by 2009.

The report shows that, although the average annual growth rate of retail e-commerce sales will slow from the 26% seen between 2001 and 2005, it will remain robust at 18.6% from 2006 to 2009.

"Online shoppers, who have faster online connections and more Internet experience, are venturing beyond the safe purchase categories of books, videos and toys that marked the first e-commerce success stories," wrote eMarketer Jeffrey Grau, senior analyst, in the report.

The retail sector of computer hardware and software is on the cusp of becoming the first category to derive a majority of its sales online, 54.5% by 2010, according to eMarketer calculations. But the categories of jewelry/luxury goods and health and beauty are making the deepest inroads into total sales, with online purchases expected to about double their percent of total category sales by 2010.

Apparel, perhaps more than any other category, demonstrates the maturity of online sales and the comfort level of consumers. Apparel e-commerce as a percent of total retail sales is expected to climb from 5.9% in 2005 to 11.4% by 2010, as specialized niche sites, high-end e-tailers and attention-grabbing technology converge to bring consumers online to buy clothes.

See U.S. Retail E-Commerce

People shopping online are generally more satisfied with the experience then those who shop in stores. This is nothing new; the trend has been evident for a couple of years. However, the gap looks like it could widen as more and more consumers shop online.

According to the annual American Customer Satisfaction Index (ACSI) E-Commerce Report from ForeSee Results, customer satisfaction with the e-commerce sector improved to a total satisfaction score of 79.6 out of 100. While this is a point lower than the rating two years ago (80.8), it has been steadily improving over the past year – up 1.3 points over last year. This compares to offline shopper satisfaction of 72.4% - down 0.3% from last year.

The gap between online and offline satisfaction is now more than 7 points or a total of 10% greater. A number of factors could explain why the trend in favor of Internet shopping:

·         Greater price comparison opportunities online

·         Less time spent shopping (no need to worry about parking!)

·         Free delivery options by many e-tailers

·         Increasing customer demands and standards

·         More aggressive competition drives sites to improve customer services as a point of differentiation

The reports states: "As consumer standards rise, the "best of the best" e-commerce organizations are increasingly standing out from the rest of the pack, challenging competitors in their categories to enhance their focus on customer satisfaction in order to compete successfully."

Leading the pack of the top performers are e-retailers (e.g. Amazon) with an 81% customer satisfaction rating. Auctions, brokerage, and travel sits are close behind.

Source: ForeSee Results

"E-retailers used to be at a disadvantage because customers couldn't touch and feel their products, but they've figured out that there's a whole lot more they can offer to make up fo that," said Larry Freed, CEO of ForeSee Results, in an interview with eMarketer.com (see Shoppers Show Rising Satisfaction with Web Shopping). “Today's online stores have evolved significantly, offering advances such as 360° views of products, customer reviews, side-by-side product comparisons, and extensive product information and specifications that often exceed what is available in a store or catalogue."

The report cites Amazon.com as a proud retailer with some past ups and downs. The e-tailer had lost 4.5% in customer satisfaction ratings, but posted a 3.6% gain after making significant site changes. Though I have to admit, Amazon.com is very good on fulfillment of customer orders, but the site lags behind leaders with respect to site usability.

The lesson is simple: if customer satisfaction is a priority for your organization, then you should be using the web as a differentiator over the competition.

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The Amazon Lesson

© 2006 Toby Ward - Prescient Digital Media

Last week Yahoo! reported record profits – double the profit of last year. What was Wall Street’s response? Hammer it. The stock dropped quickly because it failed to reach the expectations of a few analysts. Those ‘expectations’ were off a couple of pennies per share. Yahoo’s stock is now less than it was a year ago despite doubling its profit on tremendous grouwth. Yahoo’s price-to-earnings ratio now sits at under 27.

Pessimism continues to proliferate Wall Street and Main Street. Ironically, this is the complete opposite of the trend six years ago when Wall Street couldn’t buy enough Internet stocks – sending prices to outrageously high and unconscionable levels. Those same sage investors now turn down their noses at Internet stocks, driving the prices to levels lower than would otherwise be seen as reasonable to outside onlookers. USA Today’s index of 50 Internet stocks increased just 1% in 2005. Without Google, it would have lost 8.2%.

Does this mean you should hesitate to invest in your website? An informed decision is required. Let’s take a look at some of the numbers:

• Almost 80 percent of North Americans have Internet access.
• More than 50 percent have made online purchases.
• A majority use the Internet as a decision-making tool.
• Online retail sales in the two weeks preceding Christmas were up 29% over last year to US$3.03 billion.
• The Internet is cited as the most influential channel on luxury purchasing (cited by 44 percent of affluent purchasers).
• 35% of first-time buyers consider the Internet to be their most important informational tool, as compared to 8.2% naming TV
• Online newspaper reading is up 30% to 53.6 million visitors a month during the fourth quarter of 2005
• 39%of North Americans use online banking.
• 73.5% of e-commerce sites estimate sales growth of 15 to 35% this year.
• 60% of chain retailers estimate web sales growth of 25-200 percent.
• Time spent online by adult Canadians has increased 50% since 2002 and Internet use is ready to overtake watching television.

Those numbers reflect a different story then the dogged, pessimistic tale woven by Wall Street. Its credibility as it relates to Internet stocks was ruined in the bubble of 1999 – 2000. That credibility continues to fail today.

“And it's not for a lack of profit,” writes USA Today’s Matt Krantz in Dot-coms' song and dance no longer entertains investors. “Forty-eight of the current members of the Internet 50 that were public in 2000 have seen their profits as a group quadruple since then. Google and Salesforce.com were private in 2000, so that doesn't even include Google's massive profit contribution.”

Here’s another key fact: according to the IDC FutureScan, all the indicators depict an expectation of 5% growth in U.S. IT spending this year. In other words, off the street and in the offices, business is investing in IT and the Web.

Don’t be scared away by Wall Street. Instead, listen to and embrace what your customers demand.

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Online Marketing: Mastering the Basics

© 2006 Toby Ward - Prescient Digital Media

Forrester Research reveals that e-commerce sales are booming – growing 22% from $141 billion in 2004, reported DMNews.com (Forrester: E-Commerce Sales in Multichannel World Surged 22% to $172B in 2005).

If Forrester’s projections come true, this growth will continue to boom with current sales doubling by 2009. Forrester projects:

·         $198 billion in 2006

·         $228 billion in 2007

·         $258 billion in 2008

·         $288 billion in 2009.

·         $316 billion in 2009  (13 percent of projected overall retail sales)

This growth is no doubt fueled by the ease-of-use and relaxing concerns about the potential for fraud. An estimated 40% of the U.S. population is now doing some form of online shopping. Forrester also claims that consumer use of the Internet as a research tool influences more than $100 billion in annual offline sales.

The average income of online shoppers – in the low $60,000s – is still higher than offline shoppers, but it fell from the mid-$80,000s just a couple of years ago, she said.

The research however does reveal that a majority of consumers still prefer face-to-face shopping (83% of shoppers) and are the most satisfied with in-store service and the least satisfied with customer service over the telephone.

ANALYSIS:

Do invest in e-commerce opportunities, but not at the expense of in-person and traditional forms of sales and service.

’Tis the season for retail to be to top of mind, whether it’s because you’re making your list and checking it twice, fighting crowds or anxiously watching sales data to gauge the health of consumer spending, the main driver of our economy.

In the Internet world, retail is particularly fascinating now because analysts are trying to gauge on-line versus bricks-and-mortar purchases in the wake of U.S. Thanksgiving, the accepted start date in the frenzied race to acquire goodies to cram under the tree. This year, the story has been about how “Cyber Monday” would compare to “Black Friday.”

The latter phrase was coined to capture the importance of Thanksgiving Friday, the biggest shopping day of the year in the U.S., when retailers enter “the black” after months of luring semi-disinterested shoppers into their stores with discounted pricing.

The former phrase has only been in usage for a few weeks. It’s the day when shoppers return to the office and start shopping on-line, the location from which 58% of us make our on-line purchases according to comScore Networks.

The phrase also provides more insight about how savvy manipulation of hype-driven media gains attention, rather than providing an accurate measure of retail trends, according to BusinessWeek. 

The article reports that Shop.org, an association for retailers that sell on-line, coined the phrase in a November 21 press release claiming Cyber Monday to be “one of the biggest on-line shopping days of the year.” It is, in fact, the 12^th busiest day according to comScore and even trailed November 22 for sales this season.

So should we accuse the on-line retailers of living in a past era, one in which behaviour is driven by hyped events? Not all. This savvy industry understands as well as any that the Internet changes the rhythm of our lives, and is at the forefront of developing web tools that fundamentally change the way we shop.

In its new ranking of the Top 50 Retail Sites, Internet Retailer provides an interesting list of the innovations these companies have developed, including:

• Musicnotes.com developed software that displays a page of music, then plays the piece being shown while a cursor indicates which notes are playing.
• Peapod.com is equipping its delivery fleet with GPS navigation devices and providing customers with an update on delivery time with an e-mail, text message or phone call when the truck is 10 minutes away.
• BestBuy.com offers a kitchen and laundry planner that allows shoppers to create on-line plans of their rooms, then populate them with appliances. They can e-mail the resulting plans to friends, family or builders and print them out to take to the store when they buy the appliances.
• Circuit City Stores Inc. guarantees that items bought on-line will be ready to pick up in the local store in 24 minutes.

What the “Cyber Monday” phenomenon demonstrates is that much of the media will respond to a well-written press release with as much alacrity and obedience as parents will to a child’s demand for a hot toy. That approach, and the growth of blogs it helps fuel, is the topic for a different article.

In the meantime, I have to find a pink guitar for a three-year old girl. And I don’t care if I find it on-line or in a store, as long as I find it in time to put under the tree on December 25^th.