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Stores poised for online win
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November 13, 2000: 4:31 p.m. ET
Study says shoppers to buy online from traditional retailers for '00 holiday
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NEW YORK (CNNfn) - Traditional retailers are best positioned to capture a growing wave of online shopping this holiday season, according to a study released Monday.
"Those that have store, Web and catalog will be the big winners," predicted Michael Silverstein, leader of the consumer practice of Boston Consulting Group, which conducted the online study along with Harris Interactive. "The consumers tell us they're going to spend their money with brands they know. That's why we call it 'the revenge of the incumbents.'"
The traditional retailer in the best position to post gains in online shopping is electronics retailer Best Buy Inc. (BBY: Research, Estimates). Its site is positioned to move to first place for electronics purchases from fifth place last year, according to the survey, passing "pure" e-commerce sites such as Amazon.com (AMZN: Research, Estimates), eBay (EBAY: Research, Estimates) and Buy.com (BUYX: Research, Estimates), which were the top three sites a year ago. Buy.com has fallen to ninth place this year in the intentions-to-buy survey, passed by sites such as Wal-mart.com, Circuitcity.com and Sears.com, according to the survey.
Toys 'R' Us is positioned to see its leadership for online toy purchases grow, according to the survey, despite severe fulfillment problems during last year's holiday season, when many customers were notified at the last minute they would not get the toys they had ordered at the site.
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"The consumers tell us they're going to spend their money with brands they know."
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Michael Silverstein
Boston Consulting Group |
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But those problems last year were not unique. The survey also shows that the majority of online shoppers last year had problems such as Web sites crashing, sites taking too long to load or items arriving damaged or late, but even those shoppers intend to turn to the Internet for more of their purchases this year.
Only 4 percent of last year's online shoppers do not intend to buy online this year, and 44 percent expect to spend more online than a year earlier, while the same percentage intends to buy about the same amount as a year ago.
"Consumers who experienced problems have a very long memory," said Silverstein. "The good news for the retailers who had problems is it's a very small number of shoppers who were directly affected. If they read about other people having problems with a Web site, it's not as significant as if you've had the problem yourself. Say Toys 'R' Us had a fulfillment with 10,000 customers last year. If there are 30 million consumers going online in year 2000, very few of them had problems."
Surveys done earlier this year suggested great wariness by online shoppers to use Toys 'R' Us again, said Lori Iventosch-James, director of e-commerce research for Harris. But time and improvements by the company have helped them get over those perceptions, she said, and the company seems positioned to be the leading online toy site this year, according to the survey.
"They've been able to overcome some of that negativity, and they have the strong brand awareness that will bring numbers to that site," she said.
The ability to have easy returns is one key advantage that traditional retailers have over the pure online retailers, according to Iventosch-James and Silverstein.
Still, the traditional retailers who are well positioned to capitalize on their brand identity could quickly lose that advantage if their sites and fulfillment capabilities can't handle the projected growth in online shopping, said Iventosch-James.
"These are purchase intentions," she said. "They do not translate exactly into purchase behavior. If in fact the Web sites do not live up to customer expectations, we may see some of brick-and-mortar stores with strong brand identification not live up to their potential."
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"If in fact the Web sites do not live up to customer expectations, we may see some of brick and mortar stores with strong brand identification may not live up to their potential."
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Lori Iventosch-James
Harris Interactive |
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The percentage of consumers with access to the Internet has risen to 60 percent this year from 53 percent last year, according to the survey, which was supplemented by phone interviews in addition to the online questioning. In addition to the growth in the number of consumers with access to the Internet this year, more of those with access to the Web plan to shop. The survey estimates that nearly two-thirds of the consumers with access last year did not make any purchases online. That could be reversed this year, with 70 percent of those with access to the Internet saying they intend to shop online.
Because of that growth, the survey finds that 85 million consumers intend to shop online this season, up from its estimate of 40 million for last year.
The officials with Boston Consulting Group and Harris Interactive say one of the advantages for traditional retailers is shoppers' concerns about the ease of return of online purchases. Only 26 percent who shopped online last year found returns easy to do.
But the traditional retailers are also helped by strong brand identity that many of the pure online retailers have not been able to match through either Internet advertising or campaigns on traditional media such as television, radio or print, said Silverstein.
"Online advertising hasn't proved to be cost effective, and when they go on TV, it hasn't been enough of a return," he said. 
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