Forrester Research expects the U.S. online commerce market to grow to $300 billion over the next four years. But NOW is when consumers are forming their online shopping habits and developing buying loyalties. With shoppers' expectations maturing, and competitive pressures mounting, it is important for retailers to recognize the changing face of the online customers they serve.
In a recent ATG Web cast, Forrester Research's Tamara Mendelsohn talked about the e-commerce landscape, the changing demographics of the online marketplace, and what to look out for in 2007. Here is a brief look at what Mendelsohn had to say. For the full story, view the recorded Web cast.
Growth in the e-commerce arena
According to Mendelsohn, if we look at the last six years of e-commerce, the industry saw incredible growth at about a 97% compound annual growth rate between 1997 and 2003. Online retailers were able to sustain themselves on this steady growth rate, on the fact that consumers were coming online and beginning to buy online for the first time in quite large droves. But if you look at the next five years beginning with 2004, says Mendelsohn, we are experiencing a much steadier and slower growth rate. Forrester predicts a roughly 14% annual growth rate over the next five years or so. That means the number of households beginning to buy online is not climbing at the rate we've seen over the past couple of years.
Where will future growth come from?
According to Mendelsohn, the new online buyers -- the buyers who are now just beginning to buy online -- are much more demographically mainstream than their counterparts who began buying online in the late nineties or even in early 2000. They don't have as positive an attitude towards technology as those who came online before them, and consequently they're hesitant to trust the online buying experience. So for the retail industry, Mendelsohn says this means that as mainstream consumers begin to shop online they will gravitate naturally towards brands that they know and trust. All retailers, even the well known brands, really need to focus on making the buyer trust the shopping experience and to make the online channel an even more convenient and satisfying way to buy.
Who's online?
The Forrester consumer technographics survey, which includes a panel of about 60,000 households, gauges the attitudes of online consumers toward technology and seeks to understand how they incorporate technology into their lives. The survey showed that consumers that began to buy online four or more years ago tended to be under 45 in age with high household incomes. They are predominately technology optimists. These folks were the early adopters of the online channel as a way to support their lifestyle.
But looking at the buyers that came online for the first time within the past two years, the Forrester study shows this group to be a lot more mainstream. Their household income is considerably lower. They are less likely to have a college degree, and they spend less online. Only about half of them are optimistic about technology, which means that the other half don't view technology as having a positive impact on their lives. To a certain degree, says Mendelsohn, they're technophobes. They're also less satisfied with the online purchase process. Buyers that began purchasing online three or four years ago are much more satisfied than those that have begun shopping online just in the last two years. Mendelsohn says that's because the mainstream consumers are much less willing to deal with a bad technology experience. They don't engage with technology for technology's sake, as many of the early adopters did, but instead bring higher demands to the channel and expect to interact with it in a much more human fashion.
What's driving online shopping?
According to Mendelsohn, online shopping is being driven primarily by price. Forrester's research shows that the number one reason for shopping the online rather than offline channel is that the price of the product was cheaper online.
But make no mistake: Mendelsohn says even though consumers shop online because they can often find better prices there, they're still not satisfied with that channel. When Forrester asked consumers how satisfied they were with each of the shopping channels, including the Web, the call center, and the physical retail location, consumers still like the physical store best. Surprisingly, even though there are problems with the physical store in terms of training sales associates and keeping them up to speed on complex products, it is still the most preferred channel for researching products. It's also the most preferred channel for purchasing products.
Mendelsohn says this may be because the experience in the store environment is one that consumers are very familiar with and for which they have very realistic expectations. Therefore they aren't let down as much as they are with some of the newer channels.
What do consumer preferences mean for online retailers?
In Mendelsohn's opinion, the e-commerce market continues to be a huge opportunity for retailers. The online experience has a long way to go in meeting mainstream consumer expectations. There are certain values that the online channel brings to the shopping experience, such as the ease of accessing information, that the offline channel is not as good at providing, says Mendelsohn. Therefore, Forrester believes that there is a tremendous opportunity to enhance that experience over the next few years.
Where should retailers focus?
Mendelsohn identifies several spots that deserve focus. First, retailers should look at security and support for new payment methods to help consumers overcome over their hesitation to share financial information. Second, retailers should think about introducing new ways to build loyalty and drive sales through content, experience, and reinforced branding messages. Until now, the online channel has been very transaction-focused. Mendelsohn believes that 2007 represents a great opportunity to take advantage of enhanced content and focus on richer site experiences to build loyalty and drive sales.
Retailers also need to provide cross-channel consistency to raise customer satisfaction and deliver more relevant marketing. Forrester's research shows that mainstream consumers are most comfortable shopping in the offline channel, and the online needs to tie more seamlessly into that experience. According to Mendelsohn, 2007 will be the year where retailers will focus on using better tools to provide better online shopping experiences.
How do you prepare your site to address changing consumer expectations?
Learn more about the changing faces of online consumers, as well as how your business can benefit from serving them better. Check out the full Web cast.
Article source :www.atg.com
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