E-Commerce Thriving Amid Turmoil, Study Says

As part of its Global Online Retailing Report for 2000, Ernst & Young also found that 74 percent of U.S. Internet users purchased goods or services online last year, while 87 percent expect to do so over the next 12 months.

Moreover, the study said that this growth will help ensure the survival of e-commerce as a whole, with online sales projected to account for 10 to 25 percent of sales across many retail categories by 2005.

"With the emergence of the retailer you know and trust in your own backyard selling a full range of items across their stores, catalogs and Web sites, we predict the online channel will be substantial," said Stephanie Shern, global director of retail and consumer products for Ernst & Young.

Increasing Parity

According to Ernst & Young, one of the most significant trends in the e-tail arena was the increasing parity between online and in-store shoppers, with women now accounting for roughly 60 percent of all Internet buyers.

The study said the average U.S. online buyer made 13 purchases during 2000, spending roughly US$900. In addition, a quarter of those surveyed were identified as "frequent buyers" -- consumers who made purchases via the Web more than 10 times and spent more than $500. These frequent buyers also spent significantly more than occasional e-shoppers, racking up an average charge of $2,315 and making about 30 purchases throughout the year.

"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," said Shern.

Broadening Purchases

Another notable shift in 2000 was the move beyond such "commodity" items as books, CDs and computers.

While more than half of respondents said they purchased books, computer equipment or music on the Internet, 37 percent have purchased apparel and accessories online. In addition, around one-quarter bought toys and health/beauty aids during the past 12 months.

"As recently as last year, many experts doubted that online purchases of clothing and health and beauty would ever amount to much," said Shern. "But a majority of frequent online buyers compare colors, ask for advice and look for other items to complement the purchase of apparel on the Internet -- just like they do in the on land environment."

Nearly two-thirds of online buyers said that good merchandise selection was the primary reason they shop at their favorite site, while more than half cited competitive pricing as a significant advantage. Other determinants included ease of use and availability of merchandise.

However, the report found that many online merchants are in the dark when it comes to determining the factors that draw consumers to a particular site. Most companies cite convenience, trust and name recognition as top draws.

Shipping Woes

Predictably, the largest obstacle to customer satisfaction remains the cost of shipping. In fact, 46 percent of those surveyed said shipping was the top factor discouraging them from conducting Web-based transactions, while 42 percent cited it as the primary reason for abandoning a shopping cart.

Although more than half said that free shipping would get them to visit a Web site more often, Ernst & Young found that 89 percent of global e-tailers charge for delivery, and that a small percentage operate their delivery service as a profit center.

U.S. E-tail Future

In order to fully capitalize on the potential of multi-channel retailing, Ernst & Young said companies must focus their energies on improving the customer experience.

"Customers have very high expectations online -- just as they do on-land -- and their loyalty is very conditional," said Shern. "Success will depend on having a brand that enables them to meet and exceed customer expectations and improve the customer relationship."

The report also said that the coming years offer a chance for brand name e-tailers to "outdistance the competition." These firms will "need to leverage their advantages -- even if it means taking the calculated risk of blurring their brands through alliances and other co-marketing ventures -- to become truly successful in this still-developing world," said Shern.

Going Global

Although the U.S. continues to set the Internet buying pace, international consumers are quickly catching up as an increasing number of households across the globe gain access from home, said the report.

Worldwide, men still represent nearly two-thirds of the online shopping population outside the United States. However, women now account for nearly half of all Internet consumers in Canada and Australia.

"We believe that what has happened in many English-speaking countries will soon take place in the rest of the world: women will shop online in ever-greater numbers as online shopping becomes generally more accepted, as women become more comfortable with the online channel, and as product offerings online broaden," said Shern.

By and large, the top online sellers remain books, CDs and computer equipment. In addition, 58 percent of all consumers surveyed outside the U.S. said they had purchased goods from an online business located in a foreign country, primarily because the product is not available from a local retailer.

Others also cited the ability to purchase merchandise for less as a significant reason for conducting cross-border transactions.