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| Who’s on the Net and Who’s Buying? |
CONTENTS:
Introduction
Importance of the Study
The Spring ‘97 Electronic Commerce Overview
Who's on the Net?
Findings about Shoppers vs. Buyers
What’s Being Purchased?
Why Web Shoppers Choose Not to Buy on the Web
The Number of Buyers will Grow
Conclusion
Survey Methodology
CommerceNet is the premier industry association for promoting and building electronic commerce solutions on the Internet. CommerceNet’s mission is to make electronic commerce easy, trusted, and ubiquitous. Launched in April 1994 in Silicon Valley, California, its membership has grown to more than 200 companies and organizations worldwide. They include the leading banks, telecommunications companies, VAN's, ISPs, online services, and software and services companies, as well as end-users, who together are transforming the Internet into a global electronic marketplace.
Nielsen Media Research, a Cognizant company, has headquarters in New York City and offices in major markets across the U.S. It is the producer of the Nielsen TV ratings and the leading provider of broadcast and cable television information services, both nationally and locally. Through its Interactive Services division, Nielsen Media Research develops audience measurement and custom research on new media, including the Internet, the Web and online services, and has become a leading provider of research services to the Internet, advertising and electronic commerce communities.
There’s never been anything like it. The widespread growth and acceptance of the Internet has surpassed even the most optimistic projections. The normal "bell curve" of a new product or technology doesn’t seem to apply; there has been no leveling off yet. Perhaps the reason is that the Internet is not just one product or technology, it is actually a series of events, each spawning new applications and solutions which re-start the extreme slope of the adoption curve. Among these events are:
For those companies wishing to transact business over the Internet, it appears the first wave is over. The anticipation, the fear, the hype, and the speculation about the use of the Internet have given way to business considerations. The question of "Who will use the Internet?" has been replaced by "Who will make money on the Internet?" and "How soon will electronic commerce become widespread?"
The CommerceNet mission is to make electronic commerce easy, trusted, and ubiquitous by bringing together its members to network, participate in demonstrations and pilot projects, and to develop alliances to advance their company’s strategic plans and efforts. In this way companies at various stages on the adoption curve can work together toward a common goal. But to realize their objectives and expectations, companies and individuals need to know more about "Who’s on the Net and Who’s Buying?"
In 1995, Nielsen Media Research and CommerceNet produced an important demographic study. This was the first widespread, rigorously scientific, population-projectable survey of Internet access and use in the U.S. and Canada. Its finding, in August of 1995, that 16% of total persons aged 16 and above in the US and Canada had access to the Internet was considered breakthrough. Equally important was the knowledge that 10% of the population 16 years and over had actually used the Internet. This Study was followed by a Recontact Survey in the Spring of 1996, in which Nielsen and CommerceNet demonstrated that usage figures continued to increase proving that the Internet was not just a fad nor a mere "flash in the pan."
The present CommerceNet/Nielsen study measures the continuing rise of access and usage of the Internet, the Web, and online services in the U.S. and Canada, and begins to measure the viability of the Internet as a vehicle for shopping and purchasing in addition to its role as a communications medium. The study covers electronic commerce statistics, some of which are discussed in this Overview, in addition to statistics and analyses on topics such as location and frequency of Internet usage, Internet service providers used, online services, typical Web activities, etc. It is a demographics study, and as such its focus is not on the undeniable growth of the Internet in terms of developing and emerging technologies, but rather to witness public acceptance and use.
The findings of the new CommerceNet/Nielsen Study have a far-reaching impact. CommerceNet and Nielsen Media Research are making these results available in a variety of ways, including the present Electronic Commerce Overview.
THE SPRING '97 ELECTRONIC COMMERCE OVERVIEW
The Electronic Commerce Overview looks at extracts from the extensive CommerceNet/Nielsen survey results at the highest level. It concentrates on electronic commerce issues and deals with them in generalities and trends. All existing electronic transactions (ATMs, fax machines, home banking) have had to overcome some level of consumer resistance. It is clear that social and comfort issues are real. Is it inevitable that this slow adoption curve will apply to Internet shopping as well, or has the adoption of these other electronic transaction tools paved the way for unprecedented rapid acceptance?
The scope of the Electronic Commerce Overview provides a broad picture of Internet access and shopping potential. This is in contrast to the Full Report of the CommerceNet/Nielsen Demographic Study which gives far more in-depth information. For those who need to direct company investments or product development, the Spring ’97 Electronic Commerce Overview is intended to be a marketing tool, whereas the Full Report is a research and analysis tool. We recommend consideration of the full CommerceNet/Nielsen Demographic Study for companies seeking information to use as the foundation for Internet planning purposes.
Questions answered in the Electronic Commerce Overview:
Internet usage has more than doubled since the initial CommerceNet/Nielsen Internet Demographics Survey was released in Fall '95. In Dec’96/Jan’97, of all persons over 16 years of age in the U.S. and Canada, 24% had used the Internet during the past month, and 23% had used the Internet during the past month and still had access to it at the time of the interview. This is compared to 8.5% reported in Fall '95 for usage over a one month period by a comparable population.
Increased use of the Worldwide Web is also dramatic. In Dec’96/Jan’97, 18% of the population over 16 years of age in the U.S. and Canada used the Web in the past month, and 17% used the Web in the past month and still had access to it at the time of the interview. Back in Fall '95, only 6% of a comparable population had used the Web in the past month.
Of all Internet users in the target group (over 16 years in U.S. and Canada) having used the Internet in the past three months, 55% are male. (compared to 66% among Internet users in the three months prior to the Fall 1995 survey). In terms of education, of all Internet users in the target group (over 16 years in U.S. and Canada) having used the Internet in the past six months, 35% have a college degree. Using this same target group, 31% live in households with an income over $60,000 per year and seventy-three percent (73%) of these users own a computer.
FINDINGS ABOUT SHOPPERS VS. BUYERS
Anyone who believes that today’s Internet users are not using the Net for shopping is wrong. By definition, shopping is the seeking of information about a product or service one is considering buying. It is one of the most popular activities on the Internet. A large majority of Web users [73%] spend some portion of their time online searching for information about specific products or services- and most of these users [53%] did so prior to an actual purchase.
The majority of online shoppers are males between the ages of 25 and 49. The most striking differences between those who do and do not engage in online shopping are linked to age and gender. Adults between the ages of 25 and 49 are more likely to search for product information online than younger or older respondents [81% vs. 63%], and are more likely to do so prior to actual purchase [57% vs. 45%]. Males are more likely to search for product information online than females [80% vs. 63%], and are more likely to do so prior to an actual purchase [58% vs. 43%]. This gender difference is even more dramatic within respondents under 24 or above 50.
The age difference is not especially surprising, since consumers between the ages of 25 and 49 are those who do most of the shopping in the first place, on or off-line. The gender difference is more surprising with young females, whose likelihood to use the Web to shop is less than half of what it is for their male counterparts. Although females constitute 42% of all Internet users and 38% of all Web users, the Web has not yet appealed to females as a purchasing medium to the extent it has to males.
Shopping behavior is not significantly influenced by the presence of children in the house, but it is somewhat influenced by education and income. Consumers having at least a college degree are more likely than those without one to search for product/service information online [79% vs. 70%]. More of these college-educated individuals are also more likely to search online prior to actually purchasing the goods [58% vs. 49%]. Consumers living in households with income higher than $60,000 are also more likely than those with lower income to search for product/service information online [79% vs. 70%], more of them prior to an actual purchase [57% vs. 51%].
But shopping behavior is not the same as buying behavior. While the likelihood of completing a purchase online increases with age among males, it never substantially departs from the average among females. Of all Web users, 15% have used it to purchase a product or service online. This increases slightly with education and income, but once again gender and age have the most significant impact: 18% of all male Web users made a purchase online, versus 8% of all female Web users.
A majority [60%] of the consumers who chose to complete their purchases off-line despite having shopped online, did so even though the mechanisms were in place to allow them to complete the transactions online. Not only was the technology in place, but the consumer was fully aware that the option to purchase online was available.
The level of comfort with online purchases is naturally a function of the level of comfort with the Web overall. Respondents who used the Web during the past 24 hours are three times as likely to have ever purchased online than other Web users [28% vs. 9%]. In addition, online purchases are understandably more likely to come from users whose primary location of Web use is either home or work, as opposed to school or any other location.
Most online purchasers [68%] spent less than $100 on their most recent online purchase, but a substantial number [7%] spent more than $500. Among users who used the Web for shopping and then purchased either online or off-line, 37% spent less than $100, while 31% spent $500 or more. A high majority of online purchasers [79%] are satisfied with their most recent online purchase experience [4/5 on a scale of 1 to 5], citing convenience [51%] as the primary cause of their satisfaction.
Not surprisingly, computer hardware and software is the leading category for attracting both shoppers and buyers on the Internet. Other leading categories include car/automotive parts and home electronics.
The product mix changes somewhat among those who purchase online, pointing out the types of products that shoppers find information for online, but haven’t resolved to purchase online. Car/automotive parts and home electronics are such product types. While computer hardware and software still lead the pack among online purchasers, published material such as books, magazines, and newspapers fill the second place slot, followed by clothing and personal items.
WHY WEB SHOPPERS CHOOSE NOT TO BUY ON THE WEB
Completing purchase transactions online is still problematical for many. The top reasons why Web users do not purchase online are the lack of trust in the security of electronic payments [20%] and the fact that users simply have no reason to buy [14%].
Here again, gender and age groups express different concerns. Consumers between the ages of 25 and 49 are most likely to let concerns about payment security get in the way of purchasing online [24% vs. 13% for other age groups]. Males are more likely to have payment security concerns than females [22% vs. 16%].
Respondents under 25 years old are less concerned about privacy issues than older respondents [5% vs. 8%]. Not surprisingly, they mention not having a credit card as a top reason for not purchasing online [8% vs. 5% for other age groups among females, 13% vs. 6% for other age groups among males]. Among females under 25, not having found anything worth buying [8% vs. 5% for young males and the rest of the population], or simply not having any need for the product [17% vs. 13% for young males and 14% for the rest of the population] rank particularly high.
Not knowing how to purchase online [9%] and the perceived convenience of in-store shopping compared to doing so on the Web [9%] rank high across all age and gender groups. Interestingly, consumers connecting to the Web via an online service show the same level of discomfort with online purchases and cite the same reasons as those connecting directly.
When comparing Web users who were online in the past 24 hours to other Web users, frequent users are twice as concerned about payment security was an even more prevalent inhibitor [34% vs. 15%] compared to the more occassional user.
Among consumers who actively shopped online, sought to purchase a product and had the option to do so online, the perceived lack of payment security was an even more prevalent inhibitor [30%]; followed by the comparative convenience of in-store shopping [16%] and privacy issues [8%].
THE NUMBER OF BUYERS WILL GROW
The number of people who shop and buy products on the Internet is growing. Currently 73% of Web users search for information about specific products and service, and over half of these Web users [53%] did so prior to an actual purchase based on the information they found on the Internet. More than ever, Internet users are expressing interest in trying online shopping. When these facts are combined with the overall rate of growth of Web users [from 6% in Fall ‘95 to 18% in Dec’96/Jan’97 for persons over 16 in the U.S. and Canada], the outlook is extremely promising.
However, the majority of Internet users are still not likely to make online purchases in the near future. When asked whether they were likely to make an online purchase using the Web in the future, on a scale of 1 ‘not at all likely’ to 5 ‘very likely’, the mean came out as 2.4 (‘not likely’ to ‘moderately interested’).
Lack of trust in payment security continues to be the most cited reason for inhibiting online purchasing. Out of all respondents who expressed no desire to actually buy a product or service online in the future, 33% mention payment security, 17% the convenience of in-store shopping, and 11% privacy issues. A vast majority of today’s Web users feel it is unsafe to give their credit card number over the Web [83%], and are convinced that companies they purchase from online will sell their name for junk e-mail [79%]. Moreover, 46% of home users mistrust payment methods on the Web, compared to 26% elsewhere, and 16% are concerned about their privacy, compared to 7% elsewhere. However, even those respondents who say they are very unlikely to purchase online in the future do expect that the Web will, more than it does today, answer real needs and offer products and services worth buying online.
The good news is that those very likely to purchase on the Web in the future will do so overwhelmingly [69%] for the convenience that the Web offers as a purchase outlet.
The results presented in this Electronic Commerce Overview provide a snapshot of the state of electronic commerce today, as perceived by consumers in the U.S. and Canada. While the statistics confirm that the Internet has become an established shopping vehicle for information gathering, they also reveal that there are a number of inhibitors to the actual purchase of products and services on the Web. These drawbacks are based on perceptions, technologies and on the selection of products that are currently offered online. Whether these inhibitors to commerce are real or due to consumer misconceptions, they need to be more fully understood and addressed by any business that wants to unlock the full potential of electronic commerce.
This Electronic Commerce Overview illustrates a number of high-level key findings that resulted from the full CommerceNet/Nielsen Demographics Study. For more complete information, statistics, and analysis, the Full Report covers the electronic commerce issues discussed here in greater detail in addition to topics such as location and frequency of Internet usage, Internet service providers used, online services, typical Web activities, etc. The Full Report consists of over 300 pages of tables that provide many detailed results, including cross-tabulations of each survey question against approximately 25 user characteristics. A complete list of the questions covered by the Study can be found on the Nielsen Media Research web site (http://www.nielsenmedia.com). For a complete list of products and analyses available, please consult Nielsen Media Research’s web site or the CommerceNet web site (http://www.commerce.net).
CommerceNet and Nielsen Media Research will conduct a new study in six months. At that time we will continue to report the state of Internet usage in the U.S. and Canada and we should begin to see electronic commerce trends emerging. This will help merchants and consumers keep a pulse on the issues and changes in the growing area of electronic commerce on the Internet.
The CommerceNet/Nielsen Internet Demographic Survey is based on a probability sample of persons 16 years or older among telephone households in the U.S. and Canada. The sample was selected from an unrestricted random digit frame of phone numbers from exchanges operating in the U.S. and Canada. The frame was stratified by geography and approximately 150,000 phone numbers were selected with equal probability. A total of more than 6,700 persons, age 16+, completed the interview in Dec’96/Jan’97.
Up to 15 attempts were made to reach a household and a respondent was randomly selected among all household members at least 16 years old, including students temporarily living away from home in a dormitory, fraternity or sorority house. Due to the need for projectable estimates of persons, the survey was conducted with the selected respondent. Additional attempts were made if the selected respondent was not available during the initial contact. In addition, respondent weights were computed to adjust for the probability of selecting each respondent and the effects of frame under-coverage due to using a telephone frame and non-response. The weights were adjusted to reflect the population by gender, age, region, education, race and origin. This methodology allows a balanced assessment of the penetration of the Internet and the Worldwide Web and measures their impact on the behaviors of demographic groups.
While such techniques are relatively expensive and time-consuming, they are necessary to collect population- projectable information that can be used as benchmark for planning purposes. CommerceNet and Nielsen will offer such research to the industry twice a year, with updated questionnaires and continuously refined methodologies, to maintain the study’s position as the benchmark of Internet demographics studies. A more detailed description of the weighting methodology and a complete list of questions covered by the interview can be found on the Nielsen Media Research web site (http://www.nielsenmedia.com).
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