Consumers are more willing to spend online during the peak Christmas shopping season than ever before, according to the 2009 Consumer eTail Report from GSI Commerce, a global company specialising in servicing the ecommerce needs for retailers. While the UK is still technically in recession, this does not seem to have had an impact on people increasing the amount they are prepared to spend online this year.
A quarter of people are willing to spend more than £1,000 on a product online this year, compared with just 12% in 2008. There has also been a reduction in the number of consumers who claim they will cap their spending at £250 or less per product (32% in 2009, compared to 48% last year).
But just what are the most effective methods that brands can use to ensure they are the ones to receive people’s money rather than their rivals? Traditional direct marketing and merchandising tactics are most effective in attracting purchases, the survey suggests, with 63% claiming email promotions would be most likely to provoke them to make an impulse purchase and 47% citing “limited time offers”.
The much-hyped idea of online social networks becoming shopping hubs does not appear to have had a major effect on consumer behaviour, however. The research shows that just 9% of people would be happy to buy products directly through sites like Facebook, MySpace and Bebo; 28% say they would be unlikely to do so.
GSI Commerce executive vice president international Steve Davis explains/ “Although some retailers – for example, 1-800-Flowers in the US – are beginning to launch transactional stores on social networks, features such as these will fail to make a significant sales impact in the short term.”
He suggests that marketers would be better using social networks to listen to consumers’ needs and engage with them. But he says that for the moment, the data reveals that “in the vast majority of cases, they are simply inappropriate for transactional interactions.”
Getting usability basics right is also more important for consumers than trying to break into new areas such as social networks. It appears patience levels have dropped dramatically this year. Seventy-five per cent of consumers claim a lengthy registration process would be the factor most likely to make them abandon an online purchase this year, more than twice as many as in 2008 (33%).
Almost half, 45%, also cite being shown irrelevant information as putting them off spending and 38% cite a multiple-page payment process, compared to 8% in 2008.
Davis says: “Retailers need to employ thorough usability and eye-tracking tests well before the peak season. Sometimes it’s as simple as taking three strangers, putting them in a room and giving them £50 to purchase some merchandise on your sites.
“Watch the experience; ask them to talk you through it. You’ll be shocked at how many opportunities you have to simplify and enhance your shopping experience.”
This desire for ease of use is also seen in the notably increased demand this year for retailers to offer multichannel shopping, such as “buy online, pick up in-store”. Twenty-nine per cent claim their decision to purchase would be positively influenced by this option, up from just 5% in 2008.
The report also reveals that, if faced with the choice between a product offered at the same price in two stores this Christmas, 94% of consumers claim free delivery would be the single most important factor in their decision to make a purchase. This is a substantial increase from the same period last year (68%).
Fulfilment and logistics management are also explicitly tied to the potential for repeat sales. When asked what would be most likely to deter them from making a repeat purchase from a brand, almost seven in ten (68%) cite late delivery, a 140% increase on 2008 (28%). Similarly, 76% blame an expensive and lengthy returns or refund procedure, a 130% rise on last year (33%).
“It’s been known for some time that free delivery is a major influence on a consumer’s decision to purchase,” says Davis, “but now many retailers are thinking beyond simple delivery to multichannel options such as ‘buy online, pick-up or return a product in-store’.
He adds that while many retailers initially see obstacles such as cost in implementing such solutions, he says it is worth it ensuring brands and their products are available to buy in whatever manner consumers desire.
Davis explains: “Retailers are seeing that investing in a streamlined online strategy is highly profitable and can yield significantly more than investing in traditional growth areas.”
With the evidence from the research that people are willing to spend when given the right tools, encouragement and price, Davis says that he expects to see 2010 being the year that ecommerce moves from “receiving a cursory focus and finally arrives as a major board priority.”
WE ASK MARKETERS ON THE FRONTLINE WHETHER OUR ‘TRENDS’ RESEARCH MATCHES THEIR EXPERIENCE ON THE GROUND
Marketing director, SHOP.COM
The recession has been with us for a couple of years, so recessionary tactics are well established in the UK online retail sector. Added-value offers such as multibuys and warranties deals will be big influencers and consumers will also be more diligent searching out stores participating in relevant loyalty schemes.
With disruption to the postal system over the past few weeks, we should expect to see the peak buying for the festive season occur earlier than previous years, with a shift in marketing focus from discounting to delivery guarantees and the reliability of the courier being paramount.
Brand loyalty is another loser in recessionary times. Commoditisation and comparison information encourages consumers to chop and change between brands. The more established brands will find their customers looking at alternative lower priced equivalents.
Changes in the credit sector will also alter spending patterns. The “buy now pay later” culture has moved on, with people more likely to save up before buying. Combined with the increasing volume of information about products, impulse buying will be more selective.
Generally, traffic volumes continue to be strong in the comparison shopping sector as consumers become more comfortable using comparison sites as a regular part of their research process.
Ecommerce director, Travelodge
At Travelodge, we are seeing similar trends [with people willing to spend], as many consumers now have a higher disposable income due to lower mortgage payments, which has resulted in little change in their spending habits.
Conversely, due to a drop or loss in income, a smaller portion are tightening belts and seeking best-value basics. This latter trend has led to a major shift to the value sector, as highlighted in other sectors such as supermarkets where Sainsbury’s and Tesco have expanded their discounted ranges.
At Travelodge, we have seen growth in web traffic and sales during the most aggressive price war in the sector for at least a generation, with full service brands offering prices more commonly associated with the budget players. Discounts and sales have been a common thread in the market – for example, our £9 promotion generated sales of 2.7 rooms per second.
Deal seekers are increasingly turning online to save money. Therefore, to a great extent, it could be argued that online spending should always increase in a recession as it is the easiest way for consumers to quickly uncover value.
For budget players such as Travelodge, this has educated a whole new customer base and has long-term value post-recession. A question must be posed to premium brand players who have more aggressively traded margin for volume: is the longer term brand impact worth the short-term financial impact?
Managing director of online loyalty specialists, Maximiles UK
This research really underscores how shopping on the internet is now coming of age; in 2000, you would have been hard-pressed to find people prepared to part with £100, never mind £1,000, online. The concerns over payment safety and delivery in good condition and on time have, for many, been successfully addressed by the hard work of online brands.
From our own experience at ipoints.co.uk, typically, once a consumer is comfortable with making their everyday purchases online – having started small with train tickets, DVDs, CDs or books, for example – they quickly cross a threshold where online shopping becomes a habit and part of their daily routine.
It was particularly interesting to read that 47% of online shoppers are more likely to make an impulse purchase after receiving information of a limited time offer. Many online brands are already tapping into this interest.
There are a plethora of sites offering money-off vouchers and cashback on online purchases, as well as schemes such as ipoints, which encourage consumers to save up their points in order to redeem them against a “treat” product in the future.
With more and more household name brands offering loyalty and discount services online, there has never been a better time for shoppers to start using the internet for their day-to-day purchases. It is hardly surprising that more shoppers will opt for the convenience of online shopping during this festive season.