If the rumours of consumer scepticism over purchasing goods via the Internet are true, then how is it industry analysts and experts predicted 1999 to be a boom year for on-line shopping during the festive season?
One possible answer lies in banner advertising.
According to Andersen Consulting in New York, Web banner ads are responsible for influencing most on-line shopping. In fact, the firm’s study on the impact of such ads showed one quarter of all experienced Web users were encouraged to try on-line shopping in the past year, despite previous reports that suggests click-through ratios have dropped.
“They’re number one – banner ads comprise 75 per cent of our advertising,” explained Ellen McManus, national sales director for canada.com. “Click-through ratios are not the only way to track advertising…I think repeat exposure to advertising becomes very effective.”
The canada.com network is supported by 27 Southam and Hollinger on-line newspapers. It includes a career site and a car site, plus a full-service portal for personalized information, including Canadian and international news, financial data, on-line shopping, free e-mail, career postings and a business and people directory.
“I’d [compare] it to traditional media with a business reply card,” McManus continued. “If the card is taken out, does that render the advertisements ineffective? Of course not.”
On the surface, Andersen’s findings support the argument that banner ads have won the current battle of effective advertising supremacy. The study showed newspapers and magazine advertising is 14 per cent effective, television commercials at 11 per cent effective, and radio spots and billboards at four per cent each. But McManus added that other factors have played a part in the growing popularity of shopping on the Web.
“The whole legitimacy (of on-line shopping) is more widely accepted,” she said. “With more traditional players such as Future Shop or The Bay becoming involved (with on-line retail)…it’s a combination, and advertisements certainly helped.”
One surprising element of the study was the discovery that price was not the key factor for the respondents’ decision to shop on-line. Rather, it was a matter of convenience, stress-free service and site security.
The Andersen report, released last November, predicted 82 per cent of experienced Web users will shop on-line this season for their holiday gift needs. That’s a dramatic rise from the previous year’s figures of 56 per cent. In addition, 55 per cent of respondents said they will make at least one holiday purchase on-line this season, up from 37 per cent in 1998. Overall, 58 per cent of all on-line shoppers polled stated they will spend less time shopping through traditional methods, such as visiting shopping malls and scanning catalogues, in favour of on-line shopping.
To add credence to Andersen’s findings, Seattle-based AdRelevance Inc. – an Internet advertising measurement and tracking firm – reported on-line retail ad spending had increased by a combined average of 100 per cent during the period beginning July 5 and ending Nov. 8, 1999. Furthermore, the number of retailers advertising on-line jumped from 236 to 473 during the same period.
Charlie Buchwalter, AdRelevance’s vice-president of media research, said his company’s figures help illustrate the growing popularity of e-commerce among retailers.
“All companies are advertising in a number of ways,” he remarked. “We’re not experts on what they’re spending off line, but the fact remains there is a trend that’s indicative to [an increase in retailers advertising on-line].”
However, Buchwalter was quick to point out that no one source can claim responsibility for an increase in on-line shopping. He cited factors such as increased dot-com advertising in all forms of media and the public’s growing interest in the Web at large.
“There’s been a dramatic rise in Internet traffic, and in our view over the next 12 to 18 months it will only increase,” he said. “Another factor to consider is that [many] sites are more savvy, effective, transparent and fun and those elements also play a big part.”
Moreover, a Dec. 17 report issued by Internetstocks.com revealed 34.2 per cent of polled Web users said an alternative source (such as a recommendation from a friend) was responsible for their choosing to shop on-line, compared to 31.8 per cent who cited advertising on the Web. The Internetstocks.com findings echo the Andersen study declaring print ads (22.9 per cent effective), television ads (8.3 per cent effective), and radio spots (2.8 per cent effective) pale in comparison to the impact of on-line advertising.
Interestingly, AdRelevance’s study also listed the top four retail on-line advertisers as department stores (33 per cent), auction houses (16 per cent), drug/toiletry vendors and technology vendors (nine per cent). But Buchwalter downplayed the suggestion that smaller retail outlets will follow suit.
“Many of these smaller retailers are going for the jugular right now,” he said. “These [smaller] companies are making a sprint to have an impact this season but they won’t be around come January or February…it’ll be interesting to see how the wheat separates from the chaff.”
Also noteworthy in the Andersen report were the identified factors which deter on-line shopping.
Beyond security concerns, Internet users who refuse to purchase goods on-line rated the following issues as extremely influential reasons for shunning e-commerce: 46 per cent have a concern over unwanted goods, 44 per cent enjoy the traditional brick-and-mortar shopping experience, 42 per cent say Web sites require too much personal information for purchasing goods, and 41 per cent do not want to pay for delivery.
On the upside, respondents also stated they will patronize sites that boast the following characteristics: 80 per cent cite good value, 74 per cent ease of use and convenience, 65 per cent will purchase from sites that have the merchandise in stock and will provide quick delivery, and 64 per cent frequent sites that offer a wide variety of goods.
Armed with this data, it is easy to believe on-line advertising is altering the retail landscape. However, there is room to argue that the retail industry in general is enjoying a boom of late. Statistics Canada’s monthly retail report stated that for the first time in about three years Canadians are flush with a buoyant economy combined with soaring consumer confidence. For the first 10 months of 1999, total consumer spending jumped to $212 billion, up 5.6 per cent from 1998.
Buchwalter said he agreed with the Andersen study’s findings, but he reiterated there is a plethora of factors that influence consumers.
“It’s a little difficult to separate trends,” he warned. “Advertising is only one piece of the equation.”