Online Shopping: Frictions, Frustrations, and Fixes

Presented to the Information Technology & Innovation FoundationInformation Technology & Innovation FoundationFebruary 22, 2008

John B. Horrigan, PhDAssociate Director for Research

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• If you had an internet connection, why wouldn’t you shop online?

◘ Based on national random digit dial survey of 2,400 adult Americans conducted in August & September 2007

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Trends: internet use & online shoppingTrends: internet use & online shopping

0

10

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005 2006 2007

Internet use

Buy product online

Broadband at home

Retail e-commerce revenues(in $B quarterly)

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Reasons to think people would embrace online shopping

• Convenience– 78% of internet users either agree (53%) or

strongly agree (25%) that it is.

• Saves time– 68% of internet users either agree (47%) or

strongly agree (21%) that it does.

• Get bargains– 49% of internet users either agree (39%) or

strongly agree (10%) that it’s a place to find bargains.

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Barrier to online shopping• Worries over security

– 75% of internet users agree (39%) or strongly agree (36%) with the proposition that they don’t like sending personal or credit card information over the internet

• Frustration– 43% of online users have experienced frustration

over difficulty in finding information while shopping online

• Complicated– 26% of internet users agree (22%) or strongly

agree (4%) that online shopping is complicated.

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For the most part, people clear hurdles to For the most part, people clear hurdles to shopping onlineshopping online

Two-thirds of internet users have bought something online

Four-fifths of online users turn to the internet for research about products they are thinking of buying

One-quarter of online users, on typical day, do some sort of activity online connected to shopping online

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Trends in online shopping Trends in online shopping (% of Americans who have ever (% of Americans who have ever boughtbought a product online) a product online)

05

101520253035404550

2000 2001 2002 2003 2004 2005 2006 2007

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Researching potential purchases Researching potential purchases (% of Americans who, on typical day, do research on a product online)(% of Americans who, on typical day, do research on a product online)

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2

4

6

8

10

12

14

16

2000 2002 2004 2005 2007

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Aggregate numbers shield variations within Aggregate numbers shield variations within the online populationthe online population

• Older Americans– Don’t see the convenience or time-saving benefits

to online shopping

– Don’t see internet as a source of bargains

– Only somewhat more likely to see risks to sending personal information over the internet

• Low-income Americans– Very likely to see the risks to online shopping

– Not too likely to see the benefits to online shopping

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Buying products online -- by incomeBuying products online -- by income

58

30

63

49

73

59

8379

0

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30

40

50

60

70

80

90

LT $25K $25K-$60K $60K-$100K GT $100K

% of online population% of general population

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Share of internet users, by income, who Share of internet users, by income, who strongly agreestrongly agree that they don’t like sending that they don’t like sending credit credit cardcard information online information online

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5

10

15

20

25

30

35

40

45

LT $25K $25K-$60K $60K-$100K GT $100K

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Share of internet users, by income, who Share of internet users, by income, who strongly agreestrongly agree that online shopping is that online shopping is saves timesaves time

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5

10

15

20

25

30

35

LT $25K $25K-$60K $60K-$100K GT $100K

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What factors have biggest impacts on What factors have biggest impacts on online shopping?online shopping?

• Security:– If people weren’t worried about security of transactions,

levels of online shopping would be 7 points higher, i.e., 73% vs. 66%.

• Convenience:– If skeptics came to see the convenience of online shopping,

levels of online shopping would be 3 points higher, i.e. 69% vs. 66%.

• Time-saving:– If more people saw online shopping as a time-saver, levels

of online shopping would be 2 points higher, i.e. 68% vs. 66%.

• Technology:– Getting broadband to the final quarter of home internet

users with dial-up would means levels of online shopping would be 6 points higher, i.e., 72% vs. 66%.

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Why does it matter?Why does it matter?

• It takes a lot of time to be poor.

• Significant “consumer surplus” benefits of e-shopping.

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What to do?What to do?

• Better marketing by industry

• Digital literacy

• Better broadband more & faster