CONSUMER TRENDS: Online spending growth slows

Internet commerce may be growing in leaps and bounds, thanks to increased penetration among consumers. But according to a study by University of Pennsylvania’s Wharton School of Business, the amount spent per online consumer isn’t growing as fast as it had been.

The 1999 Wharton Virtual Test Market study, which tracked the online spending habits of more than 23,000 panelists who have shopped online at one point or another since 1997, found that growth in online personal spending slowed last year.

“The average annual online personal expenditure in 1997 was $411, and in 1998 it was $930 – an increase of more than 100%,” says Jerry Lohse, research director of the Wharton Forum on Electronic Commerce. “In 1999, the average amount spent per person online was $1,136 – an increase of less than 25%.”

But industry watchers say the slower growth rate in online spending is nothing to worry about. James McQuivey, research director for consumer and technographics at Forrester Research in Cambridge, MA, estimates another $200 increase in spending in 2000. “People are spending money mostly on books, music, and apparel – they’re only starting to purchase higher ticket items such as furniture and airline tickets,” he says.

Indeed, consumers are still learning to trust online shopping, says Kenneth Cassar, digital commerce strategies analyst for New York based Jupiter Communications. “There’s a predictable stream of behavior for online shoppers,” he says. “When they first go online, they research and browse but don’t buy. The second stage is when they try out buying products online, but they stick to safe, low risk products such as books.” The third stage, Cassar says, is when they purchase moderate and high-priced items, such as apparel and airline tickets. But the rate at which consumers reach these individual stages varies from person to person.

Keep them happy

Experts say that Web marketers should be more concerned with online customer satisfaction than personal online expenditures. Wharton’s Lohse says 15% of 1997 online shoppers did not return in 1998 because of bad experiences with Internet merchants.

“What’s most important is that online marketers know how many of their customers were really satisfied with their online shopping experience and who will then be most likely to be a return online customer,” Cassar says.

And any focus on customer service should favor print catalogers that have ventured online. “The leading Internet marketers are traditional catalogers,” McQuivey says. “Their order processing and fulfillment, because of their experience, is much more aligned with what consumers expect.” What’s more, he says, catalogers such as Lands’ End and L.L. Bean have an advantage over smaller virtual only marketers because they can market the trust in their name brands.

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