E-Tail Sector Shows Signs of Life

Although the recent failure of several high profile e-tailers has cast doubt on the viability of e-commerce, data from two new reports shows that experienced shoppers are poised to lead a rebound in the coming months.

“The European Online User Survey,” released Monday by Jupiter Research, indicates that Internet shoppers spend more time and money online the longer they have been exposed to e-commerce.

Meanwhile, a report by the Boston Consulting Group and Harris Interactive revealed that despite the shopping and delivery problems in the 1999 holiday season, 96 percent of last year’s holiday shoppers plan to do at least some of their holiday shopping online in 2000.

Veterans Spend More

According to Jupiter, “troubles in the business-to-consumer (B2C) sector have more to do with inevitable market consolidation and the difficulty in securing new funding than with the failure of Internet retailing.”

The survey looked at online shoppers in seven European countries — the UK, Germany, France, Sweden, Denmark, Finland and Norway — and divided them into three categories, depending upon the length of time they had been online: “Newbies,” defined as those using the Internet for one year or less; “Intermediate,” those who have been online for at least two years; and “Veterans,” those with more than two years of Internet experience.

The survey results show that only 11 percent of Newbies had made an online purchase, compared to 41 percent of the Veterans. Veterans are also spending more money online.

Twenty-five percent of the Veterans reported spending more than US$860 over the past 12 months, compared to just 12 percent of the Newbies who spend that much.

In contrast, 34 percent of the Newbies said that they had spent less than $86 online in the past 12 months, while only 13 percent of Veterans had spent that small of an amount online.

“These figures show that online consumers are initially more comfortable buying inexpensive items, but graduate onto higher margin purchases as they become more familiar and confident with using the Internet as a shopping tool,” said Jupiter analyst Mark Mulligan.

Added Mulligan, “It is essential for retailers to recognize this long-term life span of the online shopper and thus the importance of customer retention.”

Maturing Audiences

The study also found that consumers in more mature online markets are likely to spend more. For instance, in France, where only 18 percent of the population is online, the reported spending is only $447. By contrast, in Sweden, where Internet penetration is 51 percent, average spending is $897.

In Europe as a whole, only 27 percent of the population has been using the Internet for more than two years. However, by 2005, 74 percent of the population will be Veterans and only 7 percent will be Newbies. Twenty-four percent of wired Europeans are currently classified as Newbies, and 49 percent are Intermediate users.

The number of wired Europeans is also growing at a tremendous rate. There are currently only 85 million Europeans online, but that number will reach almost 171 million by 2005.

Returning Shoppers

In the U.S., the BCG study revealed that 96 percent of last year’s holiday shoppers plan to spend holiday dollars on the Web again this year, with 88 percent planning to spend as much or more online this year. Most holiday shoppers said they plan to spend 22 percent of their holiday budgets online.

“In spite of a high incidence of out-of-stock items, system crashes, poor selection, and delivery problems, the vast majority of last year’s online holiday shoppers said they are willing to give it another go. And they are also willing to spend more this time around,” said BCG’s Michael Silverstein.

Silverstein added, “Many consumers aren’t, however, prepared to go back to the sites where they experienced the purchase failure in the first place. They will go to different online retailers.”

Offline Spending

In addition to the amount of money consumers are spending online, two-thirds of holiday shoppers will also use the Internet to compare prices before they make offline purchases, according to the Boston Consulting Group.

Also, more than 25 percent of the non-shopping online population plans to use the Internet to comparison shop and obtain product information.