MIAMI -- Price is the biggest incentive for today's online shoppers. They say bargains are what most often trigger a sales transaction on the Web.
But e-commerce players should expect this dynamic to change rapidly in the next 18 months, according to Internet observers, especially as more women come on-line to buy goods.
The game also may change as items such as apparel, which require more elaborate merchandising and customer service than such commodities as packaged goods, books and CDs, are offered electronically.
"The biggest catalyst to spur more sales among current cyber buyers is an attractive price," said Charles Hamlin, president of NFO Interactive, an Internet consultant. "More than 70% of the current buyers we surveyed said price was their top consideration in making a purchase on-line."
The power of price in cyberspace was a primary finding of a study completed in recent weeks by NFO and Jupiter Communications called "Focus on the Digital Shopper: Attitudes, Behavior and Demographics."
Hamlin and Evan Cohen, Jupiter's director of data research, presented the results of the study at Jupiter's second annual Online Shopping Forum, held here late last month.
As the two-day event progressed, Internet consultants, analysts and e-commerce players increasingly agreed that commerce sites must shift their focus from capturing hits to converting browsers into buyers.
"Converting shoppers to buyers is going to require better merchandising, product selection, service, site design and speed," Cohen noted. "This is the big issue: How do we get more shoppers purchasing?
"Especially among adults, shoppers are going on-line to find something specific -- 83% in the first quarter, up from 77% last year. There's a lot of comparison-shopping on-line. This should be kept in mind while you're designing sites."
According to the NFO/Jupiter study, security was the chief reason given by Internet browsers who have not yet made a purchase on-line. The biggest factors in building trust in a Web site, users said, were a strong off-line brand and favorable word of mouth.
One piece of good news for e-merchants is that just 12% of users were not shopping on-line in the first quarter, a far smaller slice than the 41% who said they weren't shopping on-line in the same period last year.
The bad news, though, is that only 35% of users said they were "satisfied" with their on-line shopping in the first quarter, compared with 45% who said they were "satisfied" with their overall on-line experience last year.
The "satisfaction" figures do not include results from teenagers or children, who account for roughly 20% of the on-line population, or 18 million users.
"Users need an incentive to buy on-line and price is a big driver," acknowledged Kenneth Cassar, an analyst in Jupiter's digital commerce group, who participated in a roundtable discussion on "Consumer-Driven E-Commerce Strategies," held by half a dozen consultants from Jupiter.
"Although price is very important today, we expect that to change as Web merchants start to build loyalty among users. We may see comparison shopping on the Internet wane over the next few years."
"As we move from selling lots of commodities into selling bigger volumes of branded merchandise like apparel on-line, I think the price issue will diminish in importance," predicted Nicole Vanderbilt, director of Jupiter's executive research program.
If an item isn't available, or customer service isn't satisfactory in helping conclude a purchase, an item's low price does not matter, the Jupiter analysts and consultants pointed out.
"It's not just price, but the perception of value that's driving consumer business online," Vanderbilt said. "This is why e-auctions are doing so well right now."
And as on-line households are more affluent, on average, than the overall population, price-driven shoppers have not been the primary targets of most Web sites, Vanderbilt noted.
About one-third of the U.S. population, or 90 million people, are on-line, according to the NFO/Jupiter study. The mean annual income of on-line households is $61,000, nearly twice the $34,000 average of those not on-line.
Web purchases by women, who now account for around 45 million users, or 50% of the on-line population, averaged $600 per transaction in the first quarter, up from $250 a year ago.
Ninety percent of Net purchases are made with credit cards; the rest are with debit cards and virtual payment instruments that store monetary value online.
It is projected that 62 million U.S. households will be on-line by 2002, so Jupiter is advising major e-commerce players to begin carrying their own on-line inventories and leasing or building warehouses to store them during the next 12 to 24 months, rather than outsourcing those operations to lower their costs, the prevalent business model today.
"Category killers may continue to be able to get enough merchandise from central distributors, because they go narrow and deep," Vanderbilt said. "But when you get into more diversified assortments like general merchandise and fashion apparel, it's hard to drive a business if you don't have the goods on hand.
"To date, no one's done a great job in the fulfillment of general merchandise purchased on-line," Vanderbilt contended.
Much as 1998 was the year sales of apparel started to take off on-line, Jupiter is forecasting this year will mark a breakthrough for categories such as consumer electronics, decorative and soft home goods, and health and beauty aids.
And as the number of users and on-line purchases continues to mount, said Ken Allard, Jupiter's director of site operations strategy, "we will see 10% to 20% of e-commerce sites experience high-visibility failures over the next 12 months.
"I am continually amazed at the lack of funds companies are willing to commit to drive their on-line businesses, particularly in support functions like customer service," Allard said. "Forty-six percent of the consumers we surveyed told us they'd shop another site if their favorite site failed, and 9% said they'd never go back to that [problematic] site."
"There is a huge gap between the budgets being allocated to acquire users, and funds spent to operate the site, convert shoppers into buyers and build customer loyalty," Vanderbilt emphasized.
"It's getting to be less about interrupting a passive experience, like watching TV, with an ad impression and more about executing purchases and delivering the goods," observed Marc Johnson, director of Jupiter's digital commerce group and a member of the roundtable panel. "Speed, convenience and price are driving users to e-commerce sites."
NFO and Jupiter are projecting that by 2002, 62 million U.S. households will be on-line, up from 37 million households today, and most eventually will have access to the Web via television sets and portable devices rather than PCs, the dominant Internet medium today. About 2.5 million U.S. households are expected to have interactive Web TV by 2003, Jupiter estimated.