Published November 2000

Survey: E-tailing spurs global marketplace

Despite the successes and failures of e-commerce noted in the media, including the failure of numerous dot-com companies and problems with Internet orders and deliveries, the long-term view of many observers is that commerce on the Internet will continue to be a rapidly expanding segment of our global economy, soon becoming common, rather than unusual. Web commerce is, after all, still in its infancy.

Supporting that view is a recent survey by commercial real estate giant Cushman & Wakefield, a global company trying to anticipate changes that e-tailing will mean for retail outlets, warehouses and distribution centers.

The company gathered information from three different regions of the world to “gain an impression of how e-tailing is working, what is liked and disliked, and what the prospects are for its future development.” Conducted over the Internet, the survey included the views of consumers, retailers and distributors.

An executive summary of the survey includes some data worth evaluating, even granting that everything about the Internet is dynamically changing daily. As a snapshot in time, the Cushman & Wakefield overview has some interesting insights, including these findings:

Consumers
n Three-quarters of all Web shoppers access the Internet daily, regardless of age or world location.

n Two out of three Web shoppers are men (split about 50-50 in the United States and Canada, but elsewhere around the world about 75 percent of shoppers are men).

n The most popular items are books, music CDs, computer software and games.

n The Internet does not replace conventional shopping. Even for book buyers, one of the largest categories, only 21 percent say they buy mainly in cyberspace.

n Almost half of the shoppers have had trouble buying on the Web, with the most common problems being credit card transactions (too much information required) and technical (connection failures or not being able to access Web sites). Most were dissatisfied with many Web sites, primarily because of poor descriptions of goods and services (66 percent of shoppers) and a poor variety of choices.

n About 70 percent of e-tail consumers had bought on the Web in the prior month; all of the shoppers averaged one Web purchase every two weeks.

n Consumers use the Internet in conjunction with conventional retail outlets, with nearly all of them using the Web for research, which leads half of them to buy in brick-and-mortar stores. Conversely, 25 percent of the shoppers said they research books and CDs in stores before buying them online.

n Convenience is the main reason for shopping on the Internet, being able to buy at any time without leaving home (with prices and comparison shopping also ranking high).

n Barriers include not being able to see, touch or try products; waiting for deliveries; and worries about the security of payments.

n Nearly 75 percent of shoppers say they have never had to return merchandise; those who did said it was easy or very easy.

n Most consumers said they would welcome follow-up contact from e-tailers they buy from, but only one in four reported such contacts, usually in the form of special offers or discounts.

Retailers
n Four out of five retailers report their Web sites are bringing them new customers, including those from a wider geographic area, including international markets.

n Three in four e-tailers track the “loyalty” of their customers and measure repeat purchases. Fewer than half are using “cookies” to follow up with personal offers tailored to the topics consumers visit at their Web site.

n Most of the goods are sent from distribution centers, with only a third being shipped from a local retail outlet.

n Nearly all of the retailers in the survey foresee Web shopping bringing a fundamental change to their existing distribution channels; half think it likely that the format of their stores will change and expect to see a growing number of specialty shops.

n Four in five think it’s likely there will be more mergers between e-tailers and traditional retailers.

n While many retailers think their property needs will change, there is no consensus about the kind of changes to come, except that distribution and call centers are expected to see the most dramatic changes rather than sales outlets. One-third of the respondents anticipate needing their own dedicated call center and 50 percent their own distribution service.

n The survey found agreement that e-tail sales will take a larger share of business. The average level now is about 8 percent, a share that is expected to double in two years and nearly quadruple in five years.

n Retailers also expect their investment in e-tailing to increase from an estimated 7.6 percent today to 13 percent in two years and 17.5 percent in five years.

Distributors
n Delivery companies are divided as to where e-business is having the most impact, business-to-business or business-to-consumer, though they see business-to-consumer transactions having the stronger future impact.

n They agree with retailers and shoppers that books and music CDs are the sectors currently driving e-tailing, and they expect that sector to remain the leader for the next two years.

n Distributors surveyed said 83 percent of deliveries are made successfully on the first visit and 99 percent by the third try. Delivery problems include recipients not being home and difficulty in specifying delivery times. They estimate e-mail deliveries amount to about 20 percent of all their deliveries now, expecting that to rise to 50 percent in five years.

n Increasing e-tailing will demand a greater volume of warehousing and distribution space, particularly more warehouses, probably in regional clusters. More of the warehousing will be leased rather than owned, they expect.

“Overall, what is striking about the study is the commonality of responses both between the various players (customers, retailers, distributors) and across the world,” the report noted.

“This suggests that not only is e-tailing taking hold, but it is breaking down traditional market boundaries. We are beginning to see a global marketplace for goods and services (that were not previously traded worldwide).”

In any new market, according to the conclusions of the study, particularly those involving technology, “pioneers lead the way, and the effect trickles through the rest of the population.”

In the case of e-tailing, Cushman & Wakefield concluded, “what is different is that Web shoppers are spread across all age groups … suggesting that the normal ‘trickle effect’ will be much more vigorous, leading to broader and faster growth.”

Issues expected to power this growth include such things as global branding, a broader selection of available goods, more user-friendly Web sites, resolution of security issues, improved customer handling through call centers and more developed delivery systems.

The company’s survey is not the first, or the last, effort to determine the direction and rate of growth of the Internet’s impact on the business world. But it offers some of the latest trend information about one of the most important subjects for today’s retailers — the future of e-commerce.

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