comScore’s State of U.S. Online Retail Q1 2009

The recent comScore presentation on the State of Online Retail in the U.S. contained few surprises, but mainly confirmations together with some interesting perspectives.  For those unfamiliar with this material, comScore creates a quarterly report on Online Retail, combining survey results along with data from comScore’s behavioral panel.  The behavioral data covers many aspects of online behavior related to retail, including search, media exposure, and of course actual online transactions.  They also add in some other sources to give information about offline purchasing impacted by online activity.  Some of these results will eventually become available from the U.S. Department of Commerce, but comScore produces their reports several weeks in advance, and consistently close  (the Q4 figures use differing methodologies for gift card transactions, so the spread is wider).

Read the full report to draw your own conclusions (you can sign up here) but here are a few impressions:

Predictably, Q1 2009 saw the end of strong growth seen over the past several years.   I think the results are positive enough to be heartening for continuing success of online retail, although some of the growth probably comes at the expense of offline, as people are increasing the use of online to seek lower prices.

Online retail spending may have bottomed out, but it is unclear when it will start to grow again.  The current overall flatness is a result of a combination of factors for different groups. Lower income households (under $50K) show reduced spending over the same period last year, while higher incomes show some growth.  There is also distinction between age groups, with those under 44 increasing online spending and older consumers holding off.  Looks like younger people are less concerned because of longer time horizons or generally don’t want to defer spending any longer, while the older brackets are saving to rebuild their retirement assets instead of purchasing.  Depending on your perspective on the role of consumer purchasing in the U.S. economy and levels of saving, this is either a good thing or scary for the speed of the recovery.

Online prices, lower at the turn of the year through February, have now increased as inventories have been worked off, and promotional activity reduced to match.

Presumably reflecting the increased significance of comparison shopping and other money saving tools, the Internet has become more important to buying decisions than a year ago.  Three-quarters of consumers do online research before buying offline (I don’t know if this is an increase). And more people are using coupons than ever before, including from online sources.  No surprise, the role of the Internet as an integral part of shopping – both online and offline – is confirmed during tough economic times.  Regardless of whether the sale is completed offline, retailers must pay attention to providing useful information (not just discounts and sales, but also product information).   I was reminded of this recently buying a refrigerator from Sears. Maybe not the best use of time, but it was more efficient to do some preliminary research online, then discuss benefits with a sales person in the store.  In this case, we made the purchase in the store, then changed our minds after looking more thoroughly at home (and had to run the gamut of the Sears phone system to make the change – but that’s another story).  Next time, it will probably be better to do the final check after talking to the sales person with a laptop or smartphone.

comScore’s figures for incremental offline sales from search or display advertising (16% display only, 82% search only) might have you agreeing with the idea that search advertising is much more effective, but comScore points out that the reach is typically much higher for display, therefore the dollar lift may be higher for display.  In addition, the synergy for combined search and display (119% increase) is clear.  Cost effectiveness will vary with situation.

Enjoy the full report!

Idiosyncratically,
Mike Pritchard

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