“Electronic Retailing & eMarketing” NEWSLETTER
HERMES (Human Awareness Network of eCommerce)
Issue No. 5 – September-October 2000 Hellenic Electronic
Trading Research Unit
This issue and all previous issues are available at: http://www.heltrun.aueb.gr
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ERNST & YOUNG: “GLOBAL ONLINE Media Metrix, counting only November and December as
RETAILING REPORT” SURVEY FINDINGS the holiday period, forecasts average online spending to be
roughly $331 per person. eMarketer forecasts that online
According to the Ernst & Young “Global Online holiday spending will reach $12.5 billion in 2000. Other
Retailing” report, in the United States, the clear world estimates range from $19.2 billion (Computer Economics)
leader in online shopping, 39 million people shopped to $6 billion (BizRate.com). These estimates vary primarily
online in 1999, up from 17 million in 1998. According to because of different definitions of e-commerce and different
the same report, in Europe, 8.3 million people shopped periods considered for the holiday season.
online in 1999, up from 5.2 million in 1998.
How many buyers will it take to make these predictions
Based on report findings, the main reasons that non- come true? eMarketer estimates that 45 million consumers
buyers don’t buy online are: will make purchases online during this quarter -- 81% of all
Uncomfortable sending credit card information online buyers for the year. There are a few other research
Prefer to see product before purchasing estimates:
No existence of credit card
Can’t get enough information about products to NPD Group expects 54 million consumers will
make decision purchase at least one item online
Not confident with online merchants
Can’t talk to saleperson According to Pricewaterhouse Coopers, over 75% of
internet users will shop online for holiday gifts -- and of
In addition, the main concerns of the online buyers are: these browsers, 85% will make purchases Jupiter Media
Metrix predicts 35 million US consumers will buy gifts
Shipping costs too high online, up from 20 million last year.
Need to try on for fit
Prices are too high
Not appropriate for large items The NPD study, furthermore, points to a high number of
Not appropriate for luxury items repeat customers -- 69% of sites from which consumers
Want to see/feel them intend to buy, will be ones they bought from in the past.
Not appropriate for perishable items NPD Group study also points that US shoppers will spend
Concern credit card information can be stolen $12.5 billion online this holiday season (November and
December 2000) and 80% of all users will go online for gift
As far as retail companies is concerned, Ernst & Young ideas.
“Global Online Retailing” report, reveal the main sources
that companies anticipate future growth: new customers, Assumptions about unlimited e-retail growth have generally
new categories, alliances, new channels, acquisitions, been curbed during the past year. But despite the gloomy
international expansion. predictions, most researchers agree that this holiday season
will find many shoppers still buying online.
Furthermore, virtual retail companies use the following
methods to attract new traffic to their sites: portals/online According to PriceWaterhouseCoopers, 27% of Internet
ads, media TV/radio, print ads, cross-channel marketing, users have begun to peruse the web for holiday items. 25%
direct mail, e-mail, special events, special incentives. have actually purchased items online.
NETIZENS READY TO SPEND ONLINE THE SEASON OF EGIVING
In its latest eHoliday Shopping Report, eMarketer estimates It is no surprise that gifts and flowers are one of the better
that online buyers will spend an average of $280.27 this revenue-generating online retail categories. But while
season, a 30% increase over 1999. The report also aggregates eMarketer's new eHoliday Shopping Report projects e-
several other estimates of average spending per buyer -- the tailers will amass a record $12.5 billion this fourth quarter,
highest being American Express' estimate of nearly $600. gift buying is not just a year-end ritual.
Note that Forrester research counts only the last five weeks
through December 25 in its estimate. Additionally, Jupiter
Produced by eLTRUN (http://www.eltrun.aueb.gr) Edited by Adam Vrechopoulos (tel: +301 8203663, e-mail: firstname.lastname@example.org)
Electronic Retailing & eMarketing, Issue 5, September – October, 2000 (page 2)
After the 1999 fourth quarter holiday season, e-tailers AMERICANS -- TWO-FISTED MEDIA USERS
geared up for Valentine's Day and held their virtual breaths
until the next onslaught of gift-giving holidays: Easter, According to a recent NFO Interactive/Burke Inc. study,
Mother's Day, and Father's Day. Nielsen/NetRatings found wired Americans spend 3.8 hours a week watching
an increase in traffic to Valentine-related sites during the televesion while online. NFO and Burke also note that
week ending 6 February 2000 compared to the week ending even when not done in conjunction with one another,
30 January 2000: 88% for gift sites, 78% for lingerie sites, there is still a close relationship between Internet usage
and 32% for flower sites. and Television viewership. Likewise, heavy, moderate
and light television watchers spend a similar amount of
These findings are similar to those of a separate study, by
BizRate.com, which had forecast an estimated 6.5 million
Valentine orders yielding $642 million in sales by NFO/Burke also found that broadband users average 5.0
Valentine's Day, 2000. More than 50% of online shoppers hours per week simultaneously online and watching TV --
told BizRate that they intended to buy online for Valentine's compared to users with dial-up access who averaged only
Day. They also revealed what they were getting for their 3.7 hours surfing and viewing. High-speed users spend an
loved ones. average of 15.9 hours per week watching television while
their dial-up counterparts spend 17.4 hours per week.
Mother's Day contributed to a significant increase in flower However, only 16% of respondents report having high-
sales, jumping from $54 million in April 2000 to $72 speed access.
million in May 2000. Currently, the gifts and flowers market
is worth nearly $40 billion in US sales, according to various
industry sources. TOY SITES PLAY PRIVACY GAMES
ClickSure.com reports that nearly 50% of the top 10 toy
eMarketer projects that online sales of gifts and flowers will
sites do not post their privacy policies in an easily
continue to grow through 2004. Sales for 2000 will exceed
accessible area of the purchase process. ClickSure also
$1.3 billion and more than double to $3.2 billion in four
found that 70% do not identify the personal information
being collected. 30% of the sites do not provide users
Forrester Research projects online flower sales will rise by not give a specific purpose for which the personal
more than 50%, from $354 million in 1999 to $550 million information supplied will be used.
in 2000. By 2001, flower sales will reach $1 billion. Sales in
both flowers and specialty gifts will continue to increase so
that by 2004, revenue generated will reach $2.5 billion and US: WHERE THE WEB SHOPPERS ARE
$1.4 billion respectively.
According to a recent report by The Conference Board
Top business executives are increasing their use of online and NFO Worldwide, 34% of American households have
shopping as a way to complete their holiday gift buying made an online purchase in the past year -- up 24% from
commitments. CEOExpress.com, a website for senior last year. Young adults (ages 25-34) represent the biggest
executives, reported that about 92% of the executives it online shopping group, with 55% buying online this year.
surveyed purchase more gifts online. Almost 72% indicated Consumers ages 35-44 represent the second most active
they are buying gifts for family and friends, rather than market with 45%; those ages 65 and over are the smallest
shopping for business associates. market, with only 10% buying online this year.
The story is different, however, for online gift certificates. A The Conference Board/NFO also reports the latest online
study commissioned by CyberSource found that only 23% purchases by household income. Although the top income
of respondents had purchased gift certificates online. As bracket shows the highest increase in online purchase
much as 70% of those who have never purchased a gift activity (up 13%), the second most substantial increase in
certificate online cited a low level of satisfaction with online purchases occurred in the $25,000-$34,999
current online gift certificate offerings. In addition, 86% of household income bracket (up 11%).
all online buyers believe that a graphically-rich electronic or
traditional paper gift certificate has greater gift-giving value Conference Board/NFO notes that the Pacific region of
than a text-based email certificate. the US supports the highest level of online shopping
activity, with 42% of the region engaging in e-commerce.
HERMES is a Human Network on Electronic Retailing. It is partially funded by the Greek Secretariat of Research and Technology
(GSRT) and managed by eLTRUN (http://www.eltrun.aueb.gr)
Electronic Retailing & eMarketing, Issue 5, September – October, 2000 (page 3)
The Mountain states follow closely behind with 38% Even consumers who participate in loyalty programs don't
shopping online, followed directly by the East and West- evince a high degree of enthusiasm -- only 35% belong to
North Central regions with 35%. The New England region more than three programs.
has the smallest amount of online shoppers: just 29%.
A recent Gomez study reports that 88% of online e-tailers
The report also charted the 3 biggest "barriers" consumers have prioritized customer service for the 2000 holiday
feel hinder their online shopping experience: price, security season. 77% of firms consider on-time delivery a main
and ease of navigation. More than one-half of consumers are priority. 85% of pure-plays and 88% of click-and-mortars
still looking for the best prices online. will indicate a "last day to shop" on their site. Companies
believe these efforts will help them capitalize on an
eMarketer forecasts the average annual online expenditure estimated $11.4 billion market this holiday season.
of adults ages 18+ will increase from $705 in 2000 to $1,130
in 2003. One way e-merchants attempt to lure new customers is
through online coupons. eCoupons are now 10% of all
coupons used, up from 5% in the fall of 1999. So says the
#1 Online Bookstore Is...
NPD Group, which also concludes that 27% of people
The latest PowerRankings survey by Forrester Research
online are using e-coupons, down slightly from the peak
reports that Borders.com rates first in online booksellers
usage of 30% during the year-end holiday season.
over Amazon.com. Forrester analysts measured consumer
opinion and awarded Borders.com a score of 66.83 and
Amazon.com a score of 66.67. Jupiter finds that 73% of consumers typically wait for
discount promotions to appear before making a repeat
purchase at a particular e-tailer. Use of such promotions
EARNING CUSTOMER ELOYALTY rose during Christmas week in 1999, as 42.2% of
respondents to a Roberts Stephens poll indicated that they
used a coupon with their purchase online.
Customer loyalty is a key driver of profitability for both
online and offline companies. According to a study by Bain
& Co. and Mainspring, the more often a customer visits a Use of e-coupons are most popular among grocery
site, the more likely a customer is to spend an increasing shoppers. Other categories associated with e-commerce,
amount of money, and thus generate profits for the e-tailer. such as toys, books and music, are among the e-coupons
For instance, in apparel, the average repeat customer spent most frequently redeemed through any sales channel. The
67% more overall in the third year of his or her shopping NPD Group found that 59% grocery shoppers use online
relationship with an online vendor than in the first six coupons, and nearly half as much redeem online coupons
months. And, over three years, customers referred by online for books and health-related products.
grocery shoppers spent an additional 75% of what the
original shopper spent. Redemption locations for online coupons differ depending
on the category. eCommerce category coupons tend to be
Internet retailers relying on customer loyalty should beware, redeemed online more frequently than other coupon
however -- their customers will jump ship if they do not categories. NPD found that toy e-coupons posted the
heed other factors. Jupiter Media Metrix finds that 75% of highest online redemption rate at 87%, followed by books
online consumers who participate in loyalty programs say at 83%.
they are not what motivates them to make online purchases.
Instead, e-commerce providers should fill functionality gaps
or face losing customers to competitors. Only 22% of 1,200 WEB ADVERTISING:
online consumers said loyalty programs served as an NOT JUST CLICKTHROUGHS ANYMORE
incentive to buy online.
According to the new Q3 2000 Online Advertising Report
Jupiter argues that loyalty programs must go beyond giving from AdKnowledge, 61% of websurfers who click through
out points and should reward loyalty with improved service an advertisement are "converted" (AdKnowledge defines a
such as priority service, personalized offers, or e-mail conversion as a purchase, registration or request for
updates. This was further underscored by the survey data, information). As time elapses, the clickthrough-to-
which emphasized customer concerns about service: conversion rate drops.
In fact, AdKnowledge reports that 32% of all conversions
72% of respondents said that customer service is a
happen after viewing an ad without clicking through. The
critical factor in shopping satisfaction
report also notes that the number of websites seeking
advertising has increased by 35% over Q3 -- a 22% rise
Only 41% indicated they were satisfied with the service since the previous quarter.
they had experienced
ELTRUN is the eBusiness Center of Athens University of Economics and Business (AUEB)
Electronic Retailing & eMarketing, Issue 5, September – October, 2000 (page 4)
EUROPEAN USERS: THE MORE THEY SURF, THE However, poorly instituted live interaction has the potential
MORE THEY'LL SHOP of alienating more customers than it would help, leaving
companies treading very gingerly toward implementation.
According to Jupiter Research, by 2002, 51% of online Western
Europeans will be internet veterans. Jupiter reports that the A study this year by Datamonitor found that U.S.
number of people online in the six strongest internet markets businesses lost more than $6.1 billion (US$) in potential
(UK, Germany, Denmark, Sweden, France, Finland) will Internet sales in 1999 because of poor online customer
increase by 85.6 million over the next five years. service, and estimated that an industry-wide failure to
resolve the problem could lead to at least $173 billion in
Jupiter charts the progression of Internet penetration over the lost revenues through 2004.
next few years in terms of three Internet experience levels.
"Veterans" have been online for more than two years, Additionally, Datamonitor reported that 7.8 percent of
"intermediate" users have been using the net between one and online transactions initiated by consumers are abandoned
two years and "newbies" are those who have been using the because of poor customer service. Obviously, no one
internet for one year or less. thought that sub-standard customer service was a boon for
business. But until relatively recently, few companies
Jupiter also notes that online shopping in Europe depends on seemed to realize just how negative the impact could be.
Internet experience: 11% of newbies and 41% of veterans have
purchased something online. Additionally, 34% of users who The general course of action seems obvious -- get live
have been shopping online for one year or less have spent less interaction. However, Datamonitor, estimates that only 3
than EUR100 in the past year -- only 13% of those with two or percent of e-commerce Web sites currently use live chat.
more years experience spent the same amount. However, 25% Live interaction becomes an e-tailer's highest profile
of experienced shoppers have spent EUR1,000 or more in the human interaction with a customer, meaning that
last twelve months, compared to 12% of inexperienced everything has to be tuned to a perfect pitch.
Additionally, customer service agents, whose previous role
Finally, according to an ActivMedia survey, online sales for the has chiefly involved the telephone, must now be able to
B2C market will reach $1.1 trillion by 2010. Respondents incorporate the typing, spelling and grammar skills to
predict that online sales for 2000 will total $56 billion -- a handle real-time interactive chat with restless consumers.
103% increase from last year.
Finally, and perhaps most crucially, the revamped
customer service must integrate seamlessly not only with
INTERNET PENETRATION IN WESTERN EUROPE the company's existing Web site, but the company's entire
operations, online and offline.
According to NetValue, 50% of Denmark's households are
online. Spain has the same number of wired households as The Web site of brick-and-click apparel retailer Lands' End
Denmark, although they represent only 12.7% of all Spanish -- which in September 1999 became one of the first
households. companies to institute live interaction -- offers perhaps the
preeminent online model.
Due to a low percentage of online households, 46.2% of which
have been online for less than one year, NetValue categorizes Lands' End Live offers several customer service
Spain as an "emerging internet market". Likewise, the capabilities, starting with the option of instant chat from a
following gender breakdown of each country studied shows the service agent. That agent can not only answer questions,
lowest percentage of female users, 35.4%, are in Spain. but also make shopping recommendations -- causing single
or split-screen Web pages to open right up on the
NetValue notes that Denmark also takes the lead in e-mail
usage; 71.8% of online Danes are using e-mail, as are 66.3% of
wired French and 64.3% of Spanish users. Percentages are Customers with a second phone line can request that a
slightly lower in the UK and Germany -- 60.6% and 51.2% Lands' End agent call them, enabling simultaneous Internet
and telephonic service. The return call usually arrives in
well under a minute and often within 10 seconds.
IS LIVE INTERACTION READY Lands' End does not have statistics that directly track the
FOR PRIME TIME? financial impact that live interaction has had on sales.
However, online sales for Lands' End improved from $61
Online businesses unmistakably want to augment their million in 1998 to $138 million in 1999.
customer relations with everything from instant messaging to
real-time online voice conversations, as studies, analysts and It does appear that the pace of instituting live interaction
experience have convinced the industry that high-tech customer will pick up, as spending on eServices software is expected
service is key for retaining customers. to increase from $162 million at the end of 1999 to $1.95
AUEB is member of GeM (Global eCommerce Masters), http://www.eltrun.aueb.gr/gem
Electronic Retailing & eMarketing, Issue 5, September – October, 2000
billion by 2004. Furthermore, more companies are
coming to terms with the cost of live interaction,
realizing that not only in the online omelet business
do you have to break some eggs.
As more companies drift toward live interaction,
more options will be made available, and therefore
more complexity. For example, Voice-Over Internet
Protocol (VOIP), through which customer service
agents and consumers can communicate verbally over
their computers using microphones and speakers, will
arrive within the next five years, according to Huff.
According to a May study by Datamonitor, 25 percent
of Web-enabled call center solutions by 2004 will
encompass e-mail, self-service and live interactive
help. In other words, ubiquity is still a long way off.
HERMES is a Human Network on Electronic Retailing. It is partially funded by the Greek Secreteriat of Research
and Technology (GSRT) and managed by eLTRUN the eBusiness Center of Athens University of Economics and