IRI STUDY FINDS CPG E-COMMERCE THRIVING

DAN ALAIMO

CHICAGO -- E-commerce isn't dead; it's just resting.

That was one of the messages given earlier this month at the 2001 FMI Show here by e-commerce expert Brian Murphy.

Murphy said that, contrary to a common misconception, consumer-targeted e-commerce for packaged goods is thriving.

While the struggles of Internet-only e-retailers are heavily publicized, brick-and-mortar retailers are quietly establishing e-commerce operations and on-line marketing efforts are being increasingly accepted by consumers, said Murphy, partner, IRI e.Ventures Group, Cincinnati.

"While e-commerce has stalled, Internet marketing has picked up more speed and really has hit its stride," he said.

"I really believe we are in a better position today than we were six months ago. We have fewer players, but stronger business models, and people are making wiser decisions," he added.

Among the key findings of a recent IRI report:

23% of on-line consumers have made a consumer packaged good (CPG) purchase and 99% of on-line CPG buyers plan to maintain or increase their spending levels during the next year.

The percent of on-line CPG shoppers that spend more than 25% of their budget on-line is expected to rise from 12% at present to 35% by the end of this year.

Word-of-mouth recommendations are strong, with 80% of these on-line shoppers saying that they encourage others to shop on-line.

"We found that consumers are bullish about buying CPG products on-line," Murphy said. "While they are not bullish about the stock prices of the pure plays, they are feeling pretty good about e-commerce itself."

The study also found that e-retailers do not understand their customers very well, Murphy said.

For example, the top reason consumers gave for not shopping for CPG products on-line was delivery costs, cited by 68%, while only 22% of e-retailers considered that a significant concern of the customers.

Not being able to review products in person was a reason given by 57% of consumers, but just 18% of e-retailers thought that was important to the shoppers.

Meanwhile, 36% of e-retailers said lack of trust in the merchants was a cause for customer reluctance, but only 11% of consumers gave that as a reason.

The IRI study, "CPG On-line: What's Not Clicking for Manufacturers, Retailers and Consumers," was conducted on-line by Harris Interactive, Rochester, N.Y., and consisted of a sample of 7,900 primary shoppers.

Additionally, more than 75 CPG manufacturers, and e-retail and retail executives were interviewed by PERT Survey Research of Bloomfield, Conn.

The surveys were conducted from November 2000 through February 2001. Consumer packaged goods were defined as products in the categories of health care, vitamins, beauty care, food and beverages, frozen foods, household supplies, baby care and pet food.

Meanwhile, the on-line buyers are an attractive audience in terms of income, buying power and household size, he said.

"Once they have progressed to the point where they are buying products on-line, they are much more likely to participate in promotions, e-mail marketing and click-through on advertising. So your ability to persuade them is greater and I think that is key for manufacturers," Murphy said.

"As e-commerce grows, it will change everything. It will change how consumers shop, so that manufacturers and retailers need to learn new ways of persuading them. It also will change how retailers sell.

The growth of the on-line channel is hindered by the relationships between manufacturers and retailers, he said. "Manufacturers aren't dedicating the resources to help these e-retailers get off the ground, and e-retailers aren't making it easy for the manufacturers to learn and get better at selling through this channel," he said.

Functional matters also need to be examined. "The e-retailers must improve their site performance and understand what the consumer barriers are to their business model to attract more and more consumers," he said.

Murphy pointed to England's Tesco.com as an example of a successful on-line grocery shopping effort. "I think we have a lot to learn from Tesco. They doubled their on-line sales over the last year. They are fulfilling 70,000 orders per week and have about a million on-line consumers today. And, the key thing, they are profitable -- they are making money at this," he said.