CONSUMERS WARMING TO SHOPPING THE WEB

Byline: Valerie Seckler

NEW YORK — Familiarity is often said to breed contempt — but when it comes to online shopping, the Internet is inventing a new kind of virtual reality.
It’s not like 2001 is expected to bring an exodus from traditional stores or an end to the stream of dot-com bombs that keep imploding in cyberspace. Nonetheless, a new world is fast emerging where more than half of online purchasers in the U.S. claim they’ll spend less time at brick-and-mortar stores this year and more time prowling the Web as a result of their experiences cybershopping during 2000.
That’s one part of the portrait painted by Ernst & Young’s fourth annual Global Online Retailing Study. It’s the piece of the picture that provided the biggest surprise to the management consultant, said Stephanie Shern, global director of Ernst & Young’s retail and consumer goods practice.
“The percentage of online purchasers saying they’ll shop at stores less often was pretty surprising,” Shern noted in previewing for WWD exclusively the report whose results are slated to be publicly released Monday. “About 57 percent of online buyers and 76 percent of frequent online buyers said they will shop retail stores less often because of their favorable view of shopping online. It’s an affirmation that the consumer loves this channel and it’s not going away,” Shern added, despite acknowledging that 2000 was a year of devastation for numerous pure-play e-tailers and one in which the investment community made a hasty retreat from both the business-to-consumer and business-to-business sectors on the Internet.
By comparison, 39 percent of people who buy things online and 19 percent of those who frequently make purchases the e-way said they’d shop traditional stores just as often.
Ernst & Young’s findings are based on its survey of 4,400 people in 12 countries who have made purchases online, including 1,400 in the U.S. The study was conducted in October and November. For purposes of the Global Online Retailing Survey, Ernst & Young defined frequent online buyers as those who’d bought something on the Internet 10 or more times in the past 12 months and spent more than $500 doing so on average. What the consultant found, however, was that the frequent buyers they canvassed — who accounted for 25 percent of those surveyed — actually spent an average of $2,315 online last year and made an average of 30 purchases on the ‘Net.
Overall, during the past 12 months, online consumers in the U.S. on average made 13 e-purchases and spent $896 while buying things from seven Web sites; and 87 percent of Internet users said they planned to make a purchase online this year, up from the 79 percent who said they’d do so in 2000. The seven Web sites visited on average are down from the 10 listed in last year’s study, which likely reflects users’ growing comfort with increasingly familiar Web sites as well as the expansion of assortments at numerous e-tail sites during 2000. Further, the average amount spent online last year of $896 marked a decline from the $1,205 figure that typified spending in 1999 and reflects the fact that fewer high-ticket computers and peripherals were sold on the Web in 2000 than a year earlier, and that more people from all income groups are shopping online.
“The Net is taking hold big time and people are telling us it will affect significantly how much time they will spend in stores,” Shern emphasized. “It’s directional. It is clear that stores will be paring down their space as well as reallocating space to use it differently. A lot of retailers spent much of the last decade cutting down on the back room to create more space on the selling floor.”
Indeed, retailers of apparel and general merchandise already have closed or made plans to close more than 800 stores since January 2000, including the recent announcements that Wards would shutter 250 units, Bradlees would close 105 locations and Sears, Roebuck & Co. would give up 89 underperforming sites.
Shern also cited a “troubling disconnect” between the reasons why online buyers shop at particular Web sites and the reasons why those sites believe they’re drawing user traffic. Nearly two-thirds, or 64 percent, of online buyers surveyed said a “good selection” of merchandise was the number one reason they shop their favorite Web sites, followed by competitive pricing (56 percent), ease of use (42 percent) and availability of products (34 percent). However, the leading reasons the e-tailers think visitors are shopping their Web sites are convenience, trust and name recognition.
Amazon.com remained the most popular e-tail destination to buy from in 2000, with 28 percent citing it as a favorite. Amazon was followed by the Barnes & Noble Web site, with 15 percent listing it as a favorite to buy from; eBay, listed by 9 percent, JCPenney.com, CDNow.com and Buy.com, each pulling 7 percent; Drugstore.com, Fingerhut, and eToys.com, each garnering 6 percent; and ToysRUs.com winning mentions from 5 percent.
“Our research shows that the same consumer who buys from a store or a catalog is buying online, which should begin to alter the perception that online buyers are a ‘unique’ subset of the general U.S. population,” Shern pointed out. “When 57 percent of U.S. households have a PC, 41 percent have Internet access and 17 percent of the population has bought online from home during the last 12 months, it is time to recognize that online shopping is mainstream and there is no turning back.”
Other key findings of Ernst & Young’s fourth annual Global Online Retailing report include:
Apparel’s rapid rise to become the fourth most popular category that cybershoppers go online to buy, just a year after the category failed to make the top 10 list. Only books, which topped the chart, recorded music and computer products placed higher (see graph).
The extent to which frequent buyers bought substantially across more noncommodity categories marked a “dramatic shift” from previous years, especially in apparel and accessories: 62 percent of them bought clothing online in the last 12 months versus 37 percent of all Web spenders.
By 2005, the Internet is expected to produce 10-12 percent of sales to consumers of style- and trend-driven merchandise, including categories such as apparel, accessories, beauty, toys, and health products.
The profile of the average online purchaser in the U.S. is moving ever closer to that of the in-store consumer: 60 percent are women and 59 percent are married.
E-buyers are still trending higher than typical U.S. consumers in their education and income levels: 35 percent have college or post-graduate degrees and 38 percent have annual household incomes of $50,000 or more.
“As recently as last year, many experts doubted that online purchases of clothing and health and beauty products would ever amount to much,” Shern recalled. “But a majority of frequent online buyers compare colors, ask for advice and look for additional items to complement the purchase of apparel on the Internet — just like they do in the on-land environment. And they buy!”

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