Convenience is King; Ease of Use and Accuracy -- Not Price -- Dictated Consumers' 1999 Holiday Shopping Behavior.

Business Editors, E-Commerce Writers

NEW YORK--(BUSINESS WIRE)--Jan. 25, 2000

E-retailers' incessant focus on price this past holiday sales season ignored retail pioneer Marshall Field's simple rule: give the lady what she wants.

It sounds simplistic, but the reality is that most e-retailers did not satisfy even the most basic demands of consumers during this past critical shopping season, the first true Internet shopping test. E-retailers bombarded consumers with low-price messages, but consumers were much more focused on convenience and fulfillment issues.

&uot;Of all the elements of the marketing mix, the one that the Internet is supposed to transform the most is price,&uot; said Carl Steidtmann, chief retail economist for PricewaterhouseCoopers. &uot;The conventional wisdom is that price is what counts.&uot;

However, in a recent PricewaterhouseCoopers survey, consumers responded that price was not the most critical component in their decisions to shop on the Internet this past holiday season. Indeed, of the 46 percent of consumers who said they made a purchase on the Web, price consideration was mentioned by less than half the respondents. Shoppers were much more concerned with convenience factors, such as being able to shop 24-hours, search for a variety of products, and shopping in the comfort of their own homes.

Convenience factors drove Internet shoppers to spend a larger proportion of their total holiday gift spending budget online. Of those consumers who spent a greater percentage online, the top five reasons for shopping on the Internet for the holiday season were:

-    Shop online anytime -- day or night               76%

-    It takes less time to shop for products
     online compared to stores                         70%

-    Dislike dealing with the number of people
     at malls/stores during the holiday                65%

-    Received special promotions to purchase online    47%

-    It is easier to shop for products
     online compared to catalogs                       46%

-    I enjoy shopping online                           45%

&uot;There is a need to focus more on these executional factors and less on price, particularly in light of the fact that some of these sites aren't profitable,&uot; Steidtmann said. &uot;Consumers, when they busy, are buying more than just a product. They are buying the trust of the seller, the ease of making the transaction, a no-hassle return policy, speed of delivery and the convenience of shopping.&uot;

And clearly consumers weren't satisfied at e-retailers efforts on the convenience and security fronts. Of the 54 percent of consumers who did not make a purchase online during the holiday season, price issues again were not the key barriers. Consumers were significantly concerned about security and privacy issues, order fulfillment, and return hassles. The top reasons for not shopping were:

-    Concerned that it will be difficult to return
     gifts after the holidays to online retailers      39%

-    Wanted to purchase online, but products not
     available/in stock                                32%

-    Worried about not receiving gifts before
     the holidays                                      31%

-    Concerned about Web sites keeping personal
     information private                               26%

-    Refused to pay shipping and handling charges      20%

&uot;Many Internet sites remain just short of dreadful in these areas,&uot; Steidtmann noted.

But shopping on the Internet shows immense promise, especially as non-shoppers turn into shoppers. More and more people are shopping on the Internet, and more are expected to do so as the technology becomes easier and cheaper.

Consumers saw the Internet as a key tool for research and information about shopping. Nearly 70 percent of consumers polled shopped online, whether they purchased or not. And the 46 percent of consumers who did shop during this past season were seasoned shoppers with 86 percent having previously made purchases online.

And as consumers become more comfortable shopping online, they are spending more. Nearly 80 percent of consumers who shopped online spent a larger percentage of their shopping budgets online in 1999 compared to 1998.

But most critically, even with all the problems and potential for problems, consumers who shopped online reported overwhelming satisfaction with their experience. More than 80 percent were satisfied with all of their purchases, and 17 percent were satisfied with some of their purchases. Only 1 percent were unsatisfied with all of their purchases. Dissatisfaction arose from convenience and fulfillment issues. Key reasons for dissatisfaction included:

----------------------------------------------------------------------
        Reason                 % Among Unsatisfied    % Among All
                                Holiday Purchasers  Holiday Purchasers
----------------------------------------------------------------------
Did not receive a product                53%               10%
in time for the holidays
----------------------------------------------------------------------
Had to pay extra for shipping            30%                5%
to ensure on-time arrival
----------------------------------------------------------------------
Received only partial order              26%                5%
----------------------------------------------------------------------
Received damaged/broken product          15%                3%
----------------------------------------------------------------------
Had to return product to online retailer 15%                3%
----------------------------------------------------------------------

The key for e-retailers going forward is to harness their inherent advantages and answer consumers' calls for convenience, privacy and accuracy. And of course, fair prices.

&uot;E-retailers are acting much like product focused land-based retailers rather than the consumer-centric retailers that many of them profess to be,&uot; Steidtmann said. &uot;If they are to utilize the power of the Internet, then they will have to shift their focus away from selling products and toward celebrating customer lifestyles and solving customer problems.&uot;

Every month, the PricewaterhouseCoopers E-Retail Intelligence System(R) surveys over 500 Internet users regarding online shopping behavior and attitudes and Internet usage. The monthly survey is fielded online to a nationally representative sample of Internet users using National Family Opinion's Interactive Panel. Most survey respondents access the Internet at least weekly for non-business use. The December 1999 survey was fielded from January 5, 2000 to January 11, 2000.

PricewaterhouseCoopers (www.pwcglobal.com) is the world's leading professional services organization. Drawing on the knowledge and skills of 150,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance.

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