Web’s "Driving Power" Overlooked

Industry experts may look at sales predictions as the key indicator of the success of Internet-based commerce, but a new report by Ernst & Young LLP and the National Retail Foundation (NRF) shows the World Wide Web’s power to drive consumer purchases to other channels is being overlooked.

The report, "Internet Shopping," shows that 32 percent of consumers with online access bought products or services on the Internet. Only four percent make more than ten purchases a year.

The Internet, though, is being utilized by consumers in the same way pioneers of the medium used it years ago: for research. NRF/Ernst & Young’s study revealed 64 percent of those with Internet access use it to research products and services, and later buy them through "traditional channels," including in-person retail and via the telephone.

The 64 percent figure is double the percentage of consumers who research and buy the same products online, the survey said.

"The Internet is much more than a passive advertising vehicle," said Ernst & Young Marketing Vice Chairman Stephanie M. Shern, in a recent statement. Purchase decisions by consumers appear to be accelerated by the Internet, Shern said. "Retailers and manufacturers must understand this to unlock the incredible value of the Internet."

By 2000, nearly half of online sellers said they expect to generate at least 20 percent of their total revenues from the Web. In addition, 67 percent of retailers said they expected their Web sites would be profitable in the first year of operation. Eighty-one percent of retailers, meantime, thought their e-commerce operations would make money in two years.

More than half, 52 percent, of retailers have established Internet/ online presences for marketing and brand development purposes. But that group does not have any plans to use the Internet for direct sales, because of the "unsuitability of their (products) for Web sales."

Items appearing to sell well on the Internet, according to the study, include computers, software, books, travel, music and magazine subscriptions. In addition, apparel is emerging as a "viable" online category.

Of those shopping on the Web and via online services, 56 percent said they like to comparison shop electronically, 52 percent are happy with online merchandising, and 50 percent enjoy the "ease of navigation and the overall speed of process on the Web."

Probably the biggest problem for Internet retailers to overcome is the perception of credit-card buying being unsafe: Almost 70 percent of consumers surveyed said they were uncomfortable sending their credit card number through the Internet. But satisfaction increases when people use the Internet for shopping, as 52 percent of experienced Net shoppers said they were happy with credit card security.

Sixty-four percent of Web buyers are between 40 years and 64 years of age, and 68 percent of all e-commerce buyers are male, the study also showed.

"Most women still prefer more traditional shopping channels," Shern said. "But because they are often loyal to both brand and style, a clear opportunity exists in such brand-driven areas as apparel and consumer electronics."

"Web sellers need to heighten their marketing and sales efforts towards women," Shern added.

Results for the "Internet Shopping" survey were determined from comprehensive interviews with 850 consumers, 150 retailers and 150 consumer products makers. Questions centered around all of the groups’ current and future Internet e-commerce activities.

NRF’s Web site is located at http://www.nrf.com. Ernst & Young’s Web site is at http://www.ey.com.

(Contacts: Keith Hark, Ernst & Young, 212-773-5299; Ed Moed, PepperCom Inc., 212-681-1333)