Industry study by Ernst & Young:
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Tuesday January 20, 10:32 am Eastern Time
Company Press Release
SOURCE: Ernst & Young LLP
Internet's Tremendous Power in Driving Consumer Sales
in Other Channels of Distribution is Overlooked, Says New
Ernst & Young Study
Sweeping, Three-Part Internet Study of Consumers, Retailers and
Manufacturers Says Ability to Shop, Research & View Potential Purchases
are Key Elements of Success
NEW YORK, Jan. 20 /PRNewswire/ -- A comprehensive, three-part Ernst & Young study reveals
that while industry experts continue to focus on sales predictions as the key indicator of Internet
commerce, they are overlooking the Web's unmatched power in driving consumer purchases to
other channels of distribution. The study also highlights the Internet's potent ability to influence sales
of a wide growing range of products and services.
"Internet Shopping," a special report produced by Ernst & Young and the
National Retail Federation, reveals that nearly one-third of consumers
(32 percent) with online access have purchased products or services on the
Internet. Yet, only four percent make more than 10 purchases a year.
Sixty-four percent of those with Internet access research products online and
later buy them through traditional channels -- double the percentage of
consumers who research and buy the same products online. Overall, 90 percent
of consumer respondents said their online research is valuable to future
purchasing decisions.
''The Internet is much more than a passive advertising vehicle,'' said Stephanie Shern, Vice
Chairman, Industry Services of Ernst & Young. ''Our research shows that the Internet appears to
be accelerating purchase decisions. Retailers and manufacturers must understand this to unlock the
incredible value of the Internet.''
Try It... You'll Like It
Findings suggest that Internet shopping satisfaction continues to grow among a majority of Web
purchasers. Fifty-six percent said they like the Internet's ability to offer comparison shopping, 52
percent are happy with online merchandising, and 50 percent enjoy the ease of navigation and the
overall speed of process on the Web.
Clearly, the main reason consumers shop on the Internet is the convenience (53 percent) it provides.
At the same time, a large percentage of Web purchasers said that variety (46 percent) and cost
savings (45 percent) were key factors in buying on the Internet. Internet security remains the biggest
hurdle to prospective Web purchasers, with almost 70 percent reporting that they are uncomfortable
sending their credit card number through cyberspace. Yet, satisfaction appears to grow with
experience, as 52 percent of current Web buyers said they are happy with credit card security.
''As retailers search for new and innovative ways to expand their markets and keep their customers
happy, they will look increasingly to cyberspace for ideas and answers,'' said National Retail
Federation President Tracey Mullin. ''As the Ernst & Young study indicates the sky's the limit for
this exciting channel.''
Neither Nerd Nor Neophyte
Dispelling a popular myth, the cyber-shopper profile is neither a teenager nor a computer ''nerd.''
Instead, findings indicate that Web buyers are well-educated, well-paid, and in their prime earning
years; 64 percent of online shoppers are between 40 and 64 years of age. Sixty-eight percent of
online shoppers are male. ''Many retailers should take keen notice of these findings as these
demographics represent their ideal online customer,'' added Shern.
Cyber-shoppers also have active lifestyles with numerous hobbies. Fifty-one percent are avid
moviegoers, 48 percent are gardeners, 36 percent do some kind of charity and volunteer work, and
32 percent attend concerts, plays and museums. On the whole, Web shoppers engage in these
activities more frequently than consumers.
The Internet is having its most profound impact upon men, who seem to have found a shopping
channel uniquely suited to their needs. Men outnumber women as primary PC users by a
five-to-three margin and spend more time online than women. Eighty-three percent of men with
Internet access go on-line on a regular basis, compared with 64 percent of women. ''Most women
still prefer more traditional shopping channels,'' continued Shern. ''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.''
The New Millennium: Great Expectations Among Retailers & Manufacturers
Both retailers and manufacturers are extremely optimistic about the growing importance of the
Internet as a future sales channel. By the year 2000, half of online sellers expect to generate at least
20 percent of their total sales on the Web.
Retailers are extremely optimistic on the profitability of their Web sites, with more than two-thirds
(67 percent) predicting profitability in the first year of operation. A staggering 81 percent of retailers
project profitable Web sites within two years. Manufacturers are more cautious than retailers with
only 40 percent expecting profitability on their sites within a year of operation.
Fifty-four percent of retailers have established an online presence for marketing and image
development but have no plans to utilize the Internet as a sales medium citing the unsuitability of their
products for Web sales.
Sixty-nine percent of retail respondents viewed market expansion and 61 percent believed customer
retention are the two primary goals of having an online presence. Fifty-eight percent said the Internet
has allowed them to differentiate themselves from their competition and to expand their market.
''Retailers should use the Internet to drive sales, reduce costs and bolster marketing efforts,'' stated
Shern. ''Our study shows that brand names and retailer familiarity exert the most impact on Web
buying decisions. Retailers need to be well positioned for the time when the Internet becomes a
mature sales opportunity.''
Judging by manufacturers' plans, direct-to-consumer online sales do not pose an immediate threat to
retailers. Only nine percent are currently selling products on the Web and 12 percent more have
plans to begin to sell. The majority (71 percent) have no intention of selling online.
What's Hot & What's Not
Some products may be better suited for online sales than others. Information intensive items such as
computers, software, books, travel, music, and magazine subscriptions are the most popular online
products at present. Apparel is emerging as a viable online category.
The study conducted comprehensive interviews with 850 consumers, 150 retailers and 150
consumer products manufacturers about their current and future Internet buying and selling activities.
Ernst & Young LLP provides assurance and advisory business services, tax services and consulting
solutions for domestic and global clients. The firm has 27,000 people in 89 U.S. cities. Visit the
Ernst & Young Web site at ey.com.
SOURCE: Ernst & Young LLP
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