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Shopping and the Internet

By Kay Anderson and Caroline Kennedy -- Gifts and Dec, 11/1/2008 12:00:00 AM

This is the Digital Age, an age in which the Internet is a key ingredient. It has changed the way we do a lot of things both personally and professionally. It has changed the way we communicate, the way we shop and the way we do business.

While the gift industry as a whole, especially the smaller independent gift retailer, was relatively slow to embrace the Web, consumers were not. For the individual, especially Gen-Xers and Millennials, logging into the Internet is as natural as opening a newspaper, walking into a store or picking up the phone. These days, almost three-fourths of American adults use the Internet, based on research done by the prestigious Pew Internet & American Life Project. According to the latest Pew Internet survey:

Four-fifths of adult online users have used the Internet to do research about a product they are thinking about buying, with 20 percent doing this on a typical day.
Two-thirds of adult online users have purchased a product online, with 6 percent saying they do this on a typical day.

These are important figures for gift retailers to grasp, because to grow their business in this era, the Internet should be one of their most important business tools. Retailers must be Internet savvy to research new products, find new vendors, source trade shows and plan their market strategy, place orders and much more. More importantly, to reach out and market to customers, their store must have an Internet presence — a website — that is a sales extension of their brick-and-mortar store. And to serve their customer needs, retailers need to understand how consumers are using the Internet. If they don't, they will be hard pressed to compete with those who do.

GROWING ONLINE SALES

Between 2000 and 2007, online sales have increased by 361 percent while all retail sales have increased by only 35 percent. Still, online sales accounted for only 3.2 percent of all retail sales in 2007, according to the latest Department of Commerce figures. That's an impressive climb from the 0.9 percent accounted for in 2000, however.

American Internet users have embraced online shopping. It is convenient and a time-saver. That's the conclusion of the most recent survey of online shopping habits conducted by the Pew researchers.

78 percent of Internet users either agree or agree strongly with the proposition that shopping online is convenient for them.
68 percent of Internet users either agree or agree strongly that online shopping saves them time.

Retailers selling gifts and decorative accessories have taken note of possibilities offered by the Internet according to the Census Bureau. Figures show there were more than twice as many direct-selling retailers specializing in furniture, home furnishings, electronics and appliances in 2002 (the most recent year data are available) than in 1982.

According to the Pew research, most Internet users are confident online information will get them where they want to go in their online shopping. The latest Pew Internet survey indicates that eight of 10 Internet users believe they will make the right purchasing decision as they gather information online in advance of a purchase. Just more than half said they were eager to share what they have found online.

Among the things the Pew survey says retailers may want to address is a lack of information or confusing information that consumers encounter. The Pew research revealed four of 10 consumers were frustrated by the lack of information or the inability to find information online and three in 10 were confused by the information they did find online. Neither will win friends or customers for a store.

A recent survey of consumers by Chicago-based eTailing Group indicates customer reviews foster decision-making in the shopping process, where eight of 10 shoppers use the reviews to decide between products or to confirm that their selection is the right one. According to this survey, two out of five consumers actually start shopping by using reviews, while one in five read reviews after establishing a budget.

SECURITY CONCERNS

One thing that may be taking the bloom off the Internet rose is consumers concern about the security of their credit information and the possible invasion of their privacy while they're shopping. A poll released in September by the Consumer Reports National Research Center shows that most Americans are very concerned about what is being done with their personal information online. According to the poll, 82 percent of consumers are concerned about their credit card numbers being stolen online, while 72 percent are concerned that their online behaviors were being tracked and profiled by companies.

Although 68 percent of consumers have provided personal information in order to access a website, 53 percent are uncomfortable with Internet companies using their email content or browsing history to send relevant ads, and 54 percent are uncomfortable with third parties collecting information about their online behavior.

“Americans are clearly concerned with how their personal information is being collected and used by Internet companies,” said Joel Kelsey, policy analyst with Consumers Union. “The vast majority of consumers want more control over their personal information online and want the ability to stop Internet companies from tracking and profiling them.”

Still, the American consumer, pressed for time and concerned about the rising cost of gas, can be expected to increase her use of the Internet for shopping for, if not purchasing, a wide range of goods and services — and that includes gifts and home decor. So to continue to serve that customer and attract new customers, retailers need to use the Internet to reach out to them.

Internet Users Attitudes About Online Shopping
% of internet users in each age group who "strongly agree" or "agree" with statement

	18-29	30-49	50-64	65+
Source: Pew Internet & American Life Project Survey, September 2007
I prefer to see the things I buy before I buy them	85%	83%	82%	84%
The internet is the best place to buy items that are hard to find	84	82	70	61
Shopping online is convenient	83	82	77	74
Don't like giving my credit card number or personal information online	71	74	79	82
Shopping online saves me time	70	73	67	45
The internet is the best place to find bargains	62	52	38	32
Shopping online is complicated	24	24	30	34

Internet Purchase Demographics
% of Internet users who have ever made an online purchase

Source: Pew Internet American Life Project Survey, September '07*
Age
18-29	26%
30-49	46
50-64	23
65+	6
Education
Less than high school	6%
High school grad	29
Some college	25
College +	39
Income
Under $25,000	13%
$25,000-$39,999	12
$40,000-$59,999	17
$60,000-$99,999	22

Retailers and the Internet

Realizing that the Internet is changing the way business is done, gift and home decor retailers who have long been reluctant to embrace the Web are seeing that it is the wave of the future and that having a presence on the Web is important to the growth of their business. Of the gift retail stores responding to a survey conducted by Gifts & Decorative Accessories earlier this year, 54 percent had a website, and of those without a website, nearly one-half were planning to have one by year's end. Of those stores surveyed that had a website, one-half of them sold products to their customers online.

In a more in-depth Internet Use survey conducted in 2007 by Home Accents Today, a sister publication to G&DA, 70 percent of home accents retailers surveyed had a website with an additional 11 percent who planned to in six to 12 months. But of those retailers with a website, only 33 percent sold directly to consumers online, and 56 percent of them had been doing so only within the past two years.

Just like the consumer, retailers are time-crunched; they too use the Internet for research, whether it is looking for new product or other business resources, for planning market trips, communicating with customers or tracking orders. Of G&DA's survey respondents, 55 percent visit manufacturers' websites and 46 percent also source elsewhere on the Internet. Nearly 70 percent of Home Accents Today's survey respondents visit vendor websites at least monthly, if not more frequently.

Other key points from the Home Accents Today research:

The cost of launching a website and its ongoing upkeep is a barrier for many retailers, especially small ones
Three-quarters of retailer-respondents feel the Internet has caused greater price competition
Retailers are concerned that the Internet will eventually drive brick-and-mortar stores out of business
Retailers believe the Internet creates savvier consumers
Use of vendor websites reduces market attendance for some retailers; while others go to market better informed and with questions needing answers
Two-thirds of retailers feel that the Internet is important or very important to their store's future.

Sources: Gifts & Decorative Accessories' Today's Gift Retailer, 2008; Home Accents Today Internet Survey, 2007

ABOUT THE SURVEYS

Pew Internet & American Life Project Survey was conducted by Princeton Survey Research Associates International between August 3 to September 5, 2007, among a sample of 2,400 adults, 18 and older. Similar surveys have been conducted each year since 2000 as part of the Washington, D.C.-based Pew Research Center's Pew Internet & American Life Project, designed to explore the impact of the internet on children, families, communities, the work place, schools, health care and civic/political life.

Chicago-based eTailing Group's Merchant and Customer Perspectives on Customer Reviews and User-generated Content was based on a survey of 1,200 consumers who shop online at least four times per year, and spend $500 or more annually, conducted in late 2007.

The Consumer Reports National Research Center conducted a telephone survey of a nationally representative probability sample of telephone households. A total of 2006 interviews were completed among adults 18+. Interviewing took place over July 24-27, 2008.

The State of the Wholesale Web

In Gifts & Decorative Accessories' November 2007 State of the Industry Report, Eric Dean, president and founder of Whereoware, Herndon, VA, provided a comprehensive look at the gift wholesalers' use of the Internet in his article “Gift Industry 2.0.” We checked back with him for an update:

“It is all merging together;” Eric Dean told Gifts & Decorative Accessories. “Websites are becoming a platform to engage with the world, a foundation for the entire business as opposed to just a Web catalog, a way to provide information or even take orders.”

Dean cites three key trends in Internet use:

Rep portals: vendors communicate with their sales force, providing real time information such as when orders are shipped or how a rep is doing in his or her territory versus last year.

Retailer portals: Retailers can check inventory status, look up old orders, track a shipment or the status of a current order, information they used to have to call in for. Because, says Dean, “Vendors are looking to provide more customer relationship management, both to improve customer service and to cut costs, to let the computer do what a person used to do.”

Internet product information replaces print catalogs. “Print is a huge expense; it becomes obsolete so quickly, and it is a one size fits all. We see people using technologies to get a much more targeted approach,” says Dean, who adds that digital print and print on demand can be used to create smaller, more targeted print pieces to supplement online offerings.

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