ETailing Is EMerging In Economy

May 14, 2002
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GRAND RAPIDS—A recent e-tailing study done by Ernst & Young LLP concluded that consumers across the world are very satisfied with their online purchases.

In the report called Global Online Retailing, professional services firm Ernst & Young also found that more consumers are buying online and are spending more money on a greater range of merchandise.

The study might sound like a contradiction with all the recent reports of pure dot-commers turning into virtual dot-goners. Not dot-so, though. More consumers are e-buying, in part, because brick- and-mortar merchants are now offering their products online.

“The multi-channel retail sites, the traditional brick- and-mortar sites, emerged and these became a higher percentage of the favorite U.S. sites and the larger dollar spending. So that is a true statement in the sense that the pure-play dot-coms had their revenues diminish and those with a multi-chain improved and increased their revenue,” said Lisa Neemark, managing director for EY Capital Advisors LLC, an Ernst & Young subsidiary.

Even with those gains for familiar stores like Barnes & Noble, Best Buy, JC Penney, Toys ‘R Us, Staples and Wal-Mart, Neemark told the Business Journal that one pure-player still stands out as the online gorilla.

“Amazon.com still represents 28 percent of these sales, and is the favorite site of many consumers,” she said of the single-channel seller.

But with traditional stores stepping-up their selling in a non-traditional manner, their reach, reputation and advertising clout are expected to increase online sales dramatically over the next few years.

“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, in a release.

Shern foresees online selling accounting for 10 to 12 percent of all sales of apparel, toys, clothing accessories and health- and-beauty products in five years. She also predicts that online sales of books, music, software, videos and consumer electronics will reach 25 percent of all sales by 2005.

The Ernst & Young study surveyed 4,400 online buyers in 12 countries, 1,400 in the U.S. alone, and four patterns emerged from the report.

  • A multi-channel strategy is key for retail success. For any firm offering consumer goods, whether manufacturer or retailer, an online sales presence is absolutely necessary.

  • The same consumer who buys in stores is now buying online, too.

  • Consumers want the same products and prices online as they get in stores and catalogs.

  • Consumers will continue to push companies to make their online technology perform the way they want it to.

“Our research shows that the same consumer who buys from a store or catalog is buying online, which should begin to alter the perception that online buyers are a subset of the general U.S. population,” said Shern.

The study also found that sellers don’t understand why buyers buy online. Retailers reported that onliners shop because of convenience. Wrong, said consumers. They will buy from a site if it has a good selection of merchandise and competitive prices.

The U.S. portion of the study showed that 60 percent of online buyers were women, 59 percent were married, they made 13 purchases last year from seven sites, and they spent an average of $896 in 2000. In order of popularity, U.S. buyers bought books, computer products, music, apparel, accessories, toys and health- and-beauty aids online last year.

“As recently as last year, many experts doubted that online purchases of clothing and health- and beauty would ever amount to much,” said Shern.

Slightly more than 60 percent bought clothing online compared to 37 percent last year.

“But as we predicted, and is now supported by our research, 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,” she added. “And they do buy.”

The study also found that online consumers are concerned with shipping costs and that they are generally price-conscious.

The Global Online Retailing study marked the fourth consecutive year that Ernst & Young has done this research. The global firm has 77,000 employees stationed in 130 countries. The Grand Rapids office of Ernst & Young is located at 171 Monroe NW.

“When 57 percent of U.S. households have a PC, 41 percent have Internet access and 17 percent of the population has bought online from home during the last 12 months,” said Shern, “it is time to recognize that online shopping is mainstream and there is no turning back.”

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