The other day I got a call from a writer for the AP who asked me an intriguing question: Why aren’t online sales a bigger piece of the retail sales pie (analysts estimate they account for 7 to 10 percent of sales)?
So, why aren’t online sales higher? There is so much hype about the Internet and how it’s changing the world.
Here are my answers to these questions, but I’m interested to know what you think.
- There have been long known security concerns that consumers have that keep them from buying online. But these concerns are likely to be less over time.
- Many products sold on the web are experience goods – meaning you need to experience them (touch, try them on, etc.) to really evaluate them. Its a lot easily to experience these products off-line, and buy them off-line.
- Online retailers are still losing people by not having clear checkout processes. Shopping cart abandonment rates are still relatively high as people are not clearly seeing the total cost of a purchase until they get to the end of the purchase process (oftentimes you only find out the total cost – including shipping – when you are putting in your credit card). So, this, I think reflects some frustration with online shopping.
- Delayed gratification…we live in a culture that is marked by increasing levels of need for instant gratification (real time search, Twitter, etc.). In contrast, online shopping results in delayed receipt of items purchased (whereas you can go to an offline store and bring what you bought home immediately). Online retailers have tried to respond to this by giving customers more options for fast delivery, but this comes at a cost to customers and thus levels the so-called cost advantages of buying online.
- Online shopping is best for goal driven purchases, but not as good for simple browsing. If you’re looking for a specific book, online purchases are great (assuming you don’t want instant gratification – which of course, Amazon and other are trying to get around with Kindles and other readers). But in a wide variety of categories, I think people actually enjoy the shopping experience where finding unplanned items is the norm.
So, maybe online buying will hit some high point and end there, rather than end world ending up where everything is bought online. But all of this is now just predictions. What do you predict?
I think that with the upcoming generations, we’ll see more online purchasing. Security issues are being resolved, younger people, such as myself feel less a need to “experience” a good, digital natives, such as my generation find checkout to be cut and dry, we like instant gratification, but at the same time, we also like to save money, and for the most part, we know what we want to purchase. The only part that applies to me is the browsing aspect, which I rarely do. For reviews and suggestions, I usually just check Google for reviews. I can’t imagine retail lasting for more than another 40 years beyond the stuff that you can’t order online, such as your weekly groceries or emergency goods (Snow shovels for the unexpected first snow of the season, for example). A store like Radio Shack isn’t really necessary.
Hi Allen – Good post.
One of the most often cited reasons that people abandon shopping carts is that they want free shipping. This has become all the more evident in 2009, where customers have demonstrated that they are very deal focused, and this outweighs the convenience of purchasing items where they know what they want.
The highest converting websites are often ‘mission oriented’ such as flowers for your mother’s birthday (1-800Flowers) or food for the evening meal Schwan’s).
Where online shopping fails is in getting the emotional high that many seek from shopping, aka ‘Retail Therapy.’ And certainly if you had to experience products before you bought them to appreciate the purchase, and get the high, then online shopping would certainly be less relevant to many categories.
Of course there are exceptions with break all the rules: Look at shoe purchases. Zappos should, by rights not succeed as an online business according to the ‘rules.’ But Zappos is a business that offers free shipping, free (and hassle free) returns and great customer service. Online fashion retailers know that at least 30% of what is ordered will ultimately be returned, but accept this as a cost of doing business online.
I wrote a blog on ‘Why we buy, online’ (http://websiteconversion.blogspot.com/2009/08/why-we-buy-online.html) which looks at the emotional reasons for buying online. All too often we only think about the rational and ignore emotion, yet emotional buyers are much more likely to convert. It’s not until ecommerce teams embrace both customer service, good value and buyer motivations will we see wholesale migration online.
Per #3…Back in 99/2000 when I was the design director taking Best Buy online, we had that same theory so we designed a content block that would prominently display the number of items and total dollar amount on every page (no surprises). I notice they no longer show the dollar amounts – wonder what their research showed, hmmmm.
“–people actually enjoy the shopping experience where finding unplanned items is the norm”
Totally agree. I would love to see Amazon adopt a shopping display GUI like Googles new Image Swirl. If you chose an item, you’d see related items in a social graph surrounding it, rather than the horrid scroller they have now that forgets items you’ve marked as read, ordered or disliked.
Thanks all, these are really good points. It will be interesting to see if online buying gets a larger slice of the pie in the future.