THE REPORTS ABOUT ONLINE PURCHASES
By Ed Colet
E-Commerce retail sites have now moved beyond being a novel and experimental retail channel, but now compete against traditional retail channels for consumer dollars. In the past year, significant design and development work on front-end interfaces, back-end databases, and integrated infrastructures were undertaken specifically to keep traffic through e-commerce channels flowing. But, (to borrow a question from a movie) "if you build it, will they come?" had been an open question. A close watch on the online purchasing activity of consumers during this holiday season indicates the answer is a resounding "Yes". In this column, we'll look at studies that identify the factors that drive online buying behavior.
"Predictors of online buying behavior", by Bellman, Lohse and Johnson is a study published in the December 1999 issue of "Communications of the ACM". Their general approach was to survey a set of users and use regression analysis to model the relationship between individual users' characteristics and their online buying activity. Although their survey members were not a random sample, these people had similar characteristics as the people used by Media Metrix (a company administering a random sample of 10,000 PC-owning US households to analyze web traffic). The survey sample also matched well with samples used in other studies. Regression analyses were used to identify factors that are predictive of online purchasing and to identify factors that predicted the annual amount spent on online purchasing.
Their study showed several factors that were predictive of online purchasing. Ranked in decreasing order of influence, these factors were: (1) looking at product information, (2) months online, (3) number of daily e-mails, (4) working online on the job every week, (5) reading news online at home every week, (6) total household working hours, (7) clicking on banners, and (8) agreeing that the internet improves productivity For predicting the amount spent online, some of the above factors (2, 3, 4, 8) as well as a history of ordering from catalogs, and being an early adopter of new technologies were useful for predicting the amount spent annually (median amount was $200, median amount per transaction was $30).
The study's authors interpret their findings and conclude that a "wired lifestyle" characterized by "time starvation" are the important personal characteristics of online purchasers. A wired lifestyle is one in which technology is an integral part of activity both at home and at work. Also, the limited amount of discretionary time common in dual income households have led people to rely on ways to find information and buy things in a faster and more convenient manner.
Among the surprising findings was that demographic information turned out to not be a useful predictor of online purchasing. But is this profile of a technologically literate user with limited free time correlated with a certain demographic segment defined by income, education, age, and in some cases gender and race? Possibly, but the authors found that once a user is online, the different demographic characteristics don't seem to matter.
These results are consistent with other reports of online purchase activity. A "Business Wire" (December 7, 1999) article reporting that 80% of internet shoppers plan to spend as much or more this year than last contains a quote by Patrick Gates, VP of E-Commerce for AOL, Inc. He points out that: "...consumers are increasingly embracing online shopping - especially for holiday gift shopping. The more experience people have with the online medium, the more its convenience becomes entrenched in their daily lives - enhancing everything from how they communicate to the way they shop."
For those not highly reliant upon technology (i.e., not living a "wired lifestyle") there are reports that show that these people are also moving online for some of their purchases. For first or early users, a predictive factor appears to be the choice of retailer. In ZDNet News (December 6, 1999) it's reported "46 percent of new users said they were more likely to shop online at merchants from whom they had patronized offline."
All of these findings (and the additional reports that seem to come out daily) indicate that efforts devoted to building E-Commerce retail channels are being rewarded by the arrival of consumers and their dollars. It also appears that established off-line retailers are well positioned to be able to direct their satisfied customers towards their online channels.
Ed Colet is the Acting Director of Research at Virtual Gold Inc., responsible for developing analytical methods for data mining and for investigating human factors and usability issues of business intelligence systems. At present, he is in the final stage of completing a doctoral dissertation in the Cognition and Perception program at New York University's Department of Psychology. Ed has also worked for IBM Research at the T.J. Watson Research Center. At IBM, Ed was a member of the group that developed Advanced Scout, the data mining application for NBA teams. His research interests focus on statistical methods and human factors.
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