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Study finds that online shopping channel reaching maturity but growth still strong

By The Drum Team, Editorial




December 7, 2011 | 6 min read

A study undertaken by consumer insight company Transactis has revealed that the internet boom is starting to level off as online is close to full maturity as a shopping channel.

The Transactis Home Shopping Index is compiled using figures from the Transactis customer base – all the transactions of 39 million customers across 205 brands over the last five years – so gives an accurate representation of the current stance of online shopping. The report found that although online shopping growth is still strong, it is without the exponential increases of a couple of years ago. The unparalleled growth of online shopping over much of the last decade is starting to level off, according to the study. The internet has matured as a purchasing channel and has emerged as the core element of an established multi-channel retail mix. The index, which covers the five years between 2006 and 2010, showed that online shopping growth slowed to 8% in 2010, down considerably from its 20% rise in 2009, 35% increase in 2008, and 58% upsurge in 2007. Figures for the first two quarters of 2011 indicate that online purchasing growth during this period rebounded slightly to 14%. This figure is still well below the rate for previous peak growth years recorded by the study.Online spending trendsThe index encompasses purchases of fashion items, household goods, children’s merchandise, gadgets, home furnishings and other products through catalogues and websites. Online spend in these areas soared by 173% from 2006 to 2010. The percentage of home shopping purchases made via the web increased from 21% in 2006 to 51% in 2010. This growth in web purchasing came during a five-year period in which overall spend across all home shopping channels climbed by only 14%, and actually fell in 2010 (down 0.9% year-on-year) and 2009 (down 2.5%) – indicating a decline in catalogue orders at the same time as internet purchases were increasing. The age of spendersTransactis compiled online and mail order transactional data (rather than representational figures) from its retail partners for the index, and so it reveals the spending behaviours according to the age of the consumer. It was found that the biggest growth in internet shopping over the five-year period covered by the index came from consumers aged 18 to 24, who spent 1176% more online in 2010 than in 2006, followed by 25 to 34-year-olds, whose web spending escalated by 314%. During that time, total combined catalogue and online spend by consumers aged 45 years and older fell, while overall spend for younger, web-savvy consumers increased hugely, with those under 35 showing the most sustained growth – indicating a shift not just in channel preference, but in the demographics of home shopping.

Table showing percentage year-on-year increase in web spend by age

Table showing percentage year-on-year increase in spend by age

The index’s age demographic breakdown also indicates that there is less scope for future growth in online purchasing as the vast majority of those fuelling the boom in internet shopping – the youngest consumers – are already web purchasers. The figures reveal that 83% of home shoppers under age 35 were internet shoppers in 2010, making 80% of their purchases via the web.

Total spend versus web spend

Despite the figures demonstrating the huge increase in internet purchasing and the growing value of the younger consumers gravitating towards shopping online, a supplementary study included with the Transactis Home Shopping Index report revealed that multi-channel customers are far more valuable than those who use a sole purchasing point – including those who are online-only. The supplementary research, which examined the purchasing of 250,000 multi-channel consumers versus those shopping through a single channel, showed that those using a mix of media put in roughly 50% more orders and spent nearly double what online-only or offline-only buyers did – and that even when consumers were migrated from 100% offline to 100% online, they were still spending considerable less than those who continued to use multiple channels.Michael Green, Director of Insight at Transactis, comments: “The figures from the index seem to confirm that, in total, home shopping has been hit by the economic uncertainty of the last couple of years while also undergoing a fundamental transition. But to say there has basically been a linear shift from mail order to web shopping is too simplistic. What we have seen is massive growth in home shopping by younger consumers, as those under 45 have vastly boosted their home shopping spend over the last five years and adopted the internet as their primary purchasing point. Meanwhile, those aged 45 and over are spending less overall on home shopping – the total spending among the over 75s contracting by nearly a third over the five-year period – but spending more on the web.”“The customer journey has become a more subtle and complex process, led by the web. The range of influences and options consumers employ today – made ever more complicated by the opportunities opened to shoppers by smartphones, tablets and other portable devices – means that, for retailers, tracking and making sense of customer behaviour in the multi-channel landscape is no easy task. As the range of touch points grows, and economic unease lingers, it is perhaps more important than ever for retailers to pull together, analyse and use all customer data they have to hand in order to make sense of the behaviour of customers choosing to shop from home – and effectively target them with appropriate marketing communications and offers.”Green concludes: “We’ve seen that, overall, consumers’ comfort level with home shopping has improved as purchasers have taken to digital technology, especially younger customers. But it’s more than just that: many retailers have also found that cross-channel print activity – catalogues, flyers, brochures – has helped establish their brands in the minds of consumers and prompted home shoppers to go online to make purchases. This sort of cross-pollination is one of the main reasons why, as the additional research shows, multi-channel consumers are bigger spenders.”

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