Report: Online Research Drives Offline Spending

A new report by research firm Jupiter Communications (Nasdaq: JPTR) predicts that the total dollars (US$) spent by consumers for online and Web-influenced offline purchases will exceed $235 billion this year and top $831 billion in 2005.

“Online consumers are a very powerful audience and tend to be channel agnostic,” said Ken Cassar, a senior analyst with the New York-based company. “And as consumers increase their use of the Internet, the opportunity for the Web to influence their online and offline shopping behavior grows. Simply put, businesses must integrate across channels.”

Looking Online, Spending Offline

The research findings, presented during the opening session of this year’s Jupiter Shopping Forum in Chicago, Illinois, reveal the extent of the Internet’s effect on both online and offline spending. U.S. consumers who research products on the Web will spend more than $199 billion online and $632 billion offline in 2005.

Jupiter says that by 2005, shoppers who use the Net will account for 75 percent of all expected U.S. retail spending — both online and offline — up from 43 percent in 1999.

More than 68 percent of online shoppers said that they researched products online and then made their purchases at a brick and mortar store, according to a recent Jupiter/NFO Consumer Survey. Forty-seven percent said they researched online and then bought over the telephone.

Earlier this year, Forrester Research issued a report indicating that almost 60 percent of wired 16 to 22 year-olds use the Net for research in connection with entertainment spending.

Integrated Web Presence

While many businesses see their online and offline business as separate sales channels, the report indicates that customers do not make such distinctions.

Jupiter says that businesses wanting to succeed in the digital age “must take a broad view of what constitutes success online” and develop an integrated Web presence that allows them to capture and influence both online and offline transactions.

Cassar said, “Skeptical retailers eyeing fluctuations in the financial market and the increasing failure rates of Internet companies are often blind to the most important issue — specifically, the degree to which their online efforts will affect their offline business.”

Tracking Customers

Companies are not doing a good job of tracking the ability of their Web sites to drive sales to traditional channels. A recent Jupiter Executive survey showed that only 21 percent of multi-channel retailers have the ability to track customers across channels.

According to Cassar, “The retailer that does not understand the impact of the Internet on its store and catalog channels is likely to underinvest in the Internet, missing opportunities to capture incremental sales in all channels.”

Changing Face of Web Shoppers

Meanwhile, in a separate study, Forrester Research found consumers are increasingly giving online commerce a chance. Eleven million more consumers will buy online this year, driving Internet retail spending to over $38 billion in the United States.

The impressive increase in online sales is partially due to the changing profile of the Internet shopper. “When we started surveying online consumers three years ago, Web buyers were a homogenous group, consisting of affluent males who used the Net to purchase software,” said Christopher Kelley, associate analyst at Forrester Research.

“As new Web shoppers, who increasingly resemble the offline population, become more comfortable shopping online, their Net spending habits will mirror those currently seen with experienced Web shoppers,” Kelley said.

Gender Gap Gone

Forrester found two reasons for the anticipated increase in online shopping. First, half of all new online buyers are women, meaning that Net spending is no longer dominated by young males.

Second, online shoppers are becoming more adventuresome, exploring products across new categories. Forrester found that the increase in spending online correlates with an increase in research on products such as computers, consumer electronics and travel.

Still, some consumers have not overcome their feelings of insecurity about online shopping, with fear over releasing credit card information being the number one inhibiting factor. In fact, 52 percent of online households do not yet shop online over concern that their credit card information may be stolen and their personal information randomly distributed.

April Spending Up

Forrester also released results of its Online Retail Index for the month of April, prepared in conjunction with the National Retail Foundation and Greenfield Online.

The index shows total online spending in April reached more than $3.2 billion, an increase of $281 million over March. The average expenditure per customer was $252.

Shopping patterns for April mirrored offline consumer spending, with an increase in sales of products traditionally popular in the spring, including sporting goods, tools, gardening products, apparel and footwear.