Shoppers Flock To Internet, Driving Sales, Earnings, Share

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Consumers are increasingly spending their dollars via e-commerce outlets, a variety of studies show, and convenience is the main driving force behind the trend.

Based on a recent Buyer Study by the Washington-based Electronic Retailing Association (ERA), which measured the shopping habits and preferences of 600 consumers in four direct-response channels — radio, TV infomercials, home shopping and the Internet — consumers indicated that shopping directly from home made it easier to make purchases and avoid the pressure sometimes unnecessarily placed by salespeople.

The number of purchases by online buyers rose from 8.5 to 12 per person since 2004, according to the report, which was conducted for ERA by Phoenix-based Ellison Research. Online purchases are also well-considered, the study showed: 86 percent were planned and researched, and nine out of 10 online consumers said they made multiple visits to the same Web site before buying the product.

“The future of U.S. e-commerce looks promising,” agreed Jeffrey Grau, senior analyst of New York-based market research firm eMarketer. “We're finding satisfied shoppers, profitable online retailers and increased revenues.” Indeed, U.S. consumers will spend $84.5 billion online this year for retail goods and services, Grau noted in a recent eMarketer report, “E-Commerce in the U.S.: Retail Trends,” while that number is projected to grow to $139 billion by 2008. Computers remain the biggest category in e-commerce, he said.

E-tailers are also improving their bottom as well as top lines. Seventy-nine percent of all online retailers were profitable in 2003, Grau said, up from 70 percent in 2002. Catalogers had the most profitable Web sites, with 28 percent operating margins, representing a 22 percent increase over 2002. Web-based retailers had profit margins of 15 percent in 2003, compared to 16 percent losses in 2002.

The online channel is also growing as a percentage of total sales. According to the trade group Shop.org, several categories are expected to glean at least 10 percent of total sector sales from e-tail purchases this year, led by computer hardware and software which will generate a whopping 48 percent of all sales online. “The State of Retailing Online 8.0,” Shop.org's annual study of 137 retailers conducted by Cambridge, Mass.-based Forrester Research, also predicts that 13 percent of all consumer electronics sales will be transacted online, as will 12 percent of all video game and toy volume.

Women in particular are driving the trend towards e-commerce. Scott Silverman, executive director of Shop.org, said, “Women are flocking to the Internet in droves to comparison shop, research and buy. Online retailers who sell products that are purchased by women are in a favorable position this year, as we expect those categories to grow substantially.”

Search engine marketing is another driving force, appearing as the clear leader as a source of new customers. According to Shop.org's study, retailers reported that search engine marketing delivered 43 percent of overall customers to its sites.

The study also indicated that 20 percent of in-store sales are influenced by the Web, compelling click-and-mortar retailers to further integrate their physical and virtual stores.

Trends also bode well for other direct electronic marketers. ERA's Buyer Study showed that two-thirds of TV shoppers had bought from the same tele-retailer before their most recent purchase, and that there is a 70 percent likelihood of multiple channel purchases. For example, seven out of 10 radio consumers, TV shopping consumers and TV infomercial consumers have bought through more than one channel.

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