In order to improve your customer’s online shopping experience it’s important to first understand why they buy.

Reason for Study
Shopper Approved wanted to help online retailers understand why customers choose to shop online over going to their local shopping center or brick and mortar store. Once online merchants understand why customers are shopping online, they will better know how to prioritize operational improvements and focus their marketing efforts.

Methodology and Details
We surveyed 25,660 individual consumers, immediately after they made an online purchase from one of 207 participating small and mid-sized online retailers from a wide array of industries. These are businesses competing with large online retailers, big box retailers and other local retailers.  We asked their customers the following question: “What key factor influenced you to buy online instead of locally?”  Shoppers were then given seven choices to choose from. In order to ensure accurate and unbiased results, the position of the options in the list was randomized for each participant and each option showed in each list position an equal number of times.

Results
What key factor influenced you to buy online instead of locally?

25.4% – Larger selection (6530)

25.0% – Better pricing (6415)

24.7% – More convenient (6330)

10.7% – Other (2757)

7.2% – Time savings (1856)

3.6% – Easy to compare (917)

3.3% – No sales tax (855)

Key Findings
Of the primary reasons that people shop online, three overwhelmingly stand out, namely ‘Selection’, ‘Pricing’ and ‘Convenience’. Each of these options was selected by approximately one fourth of the respondents (75.1% total).

This information has significant implications for online stores because it helps retailers understand where they should be focusing their efforts.

Selection. Local retailers, even Big Box stores, have limited shelf space and usually focus on best-selling or newer items. They cannot always stock every product in a specific niche. However, the increased visibility and access to the world-wide market can make it feasible for online merchants to sell more obscure items online that cannot find a market locally. Online retailers should consider increasing their selection within niches to pick up long-tail orders.  This is a natural response to the needs of customers that cannot be met in any other way.

Pricing. This study confirms that consumers are sensitive to price and that pricing is a significant reason why consumers shop online. Online retailers are at somewhat of a disadvantage in this arena because they must pay to ship product to consumers and the cost of shipping is often significant. Online sellers should watch their shipping costs closely. We have not polled online retailers about shipping costs, but some stores we discussed this with indicated that their cost of shipping as a percentage of total order amount regularly exceeds 20%.  If online sellers can find a way to sell at lower prices than local sellers or eat the cost of shipping for consumers, they could pick up additional sales.

Convenience. Consumers also shop online for convenience. We didn’t poll specifically why consumers selected convenience as the primary reason for shopping online. Obviously shopping from home or work at any time is inherently convenient but retailers can work to make the shopping experience even more convenient for their customers. In order to make their sites more convenient, online sellers can:

  • Make their sites load faster by focusing on page size and/or by using a CDN (Content Delivery Network) like Akamai or Edgecast.

  • Make sure their sites are cross-browser compatible. There are several tools that retailers can use including crossbrowsertesting.com and browserstack.com.

  • Build in mobile compatibility.  Mobile shopping is the fastest growing demographic, and smartphones are making it increasingly easier to buy.

  • Improve their user experience and the design of the site

  • Offer more shipping options. Retailers could consider adding overnight or second day air shipping if they don’t already offer it.

  • Make sure orders are picked, packed and shipped in less than 24 hours

  • Make it easy to track orders and view order history online

  • Focus on improving the checkout experience and making the process as frictionless as possible

  • Make sure product images are large and clear and product descriptions and easy to understand

These are just some ways that online retailers can make the online shopping experience more convenient for shoppers.

Of the 4 remaining answers, 10.7% chose ‘Other’, 7.2% chose ‘Time Savings’, 3.6% chose ‘Easy To Compare’, and 3.3% chose ‘No Sales Tax’.

Sales Taxes. One of the most interesting answers in the survey was the surprisingly low ‘No Sales Tax’ response.  “No Sales Tax” was the least selected option at 3.3%, and this factor does not appear to be a primary driver of the decision to purchase online. The United States Congress is currently considering legislation that would require U.S. Internet retailers to collect and remit sales and use taxes on all online purchases made within the United States. Proponents of this legislation often argue the law is necessary to “level the playing field” because, they claim, people primarily shop online to avoid sales tax. However, these claims are not substantiated in the behavior of actual shoppers.

Online retail composes less than 6% of all U.S. retail purchases according to the U.S. Census (http://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf). Also, according to James S. Gilmore III, the former chairman of the Congressional Advisory Commission on Electronic Commerce, 83% of online sales are made from Big Box stores that have already established nexus in many or all states, and therefore are already collecting and remitting sales taxes. That means that just 1.02% of all retail orders are made without collecting sales tax a the time the order is placed – because the seller does not have physical presence in the state of the purchaser. And when you consider the results of our survey only 3.3% of those orders within that 1.02% group or .033% of all retail purchases are made online primarily to avoid a sales tax. In summary, 3 retail orders out of every 10,000 are made online (instead of in a local store) primarily to avoid paying sales taxes.

Some might suggest that not collecting sales taxes would give online retailers a pricing advantage, however, as mentioned above, remote-selling companies have to pay to ship their products to consumers and the cost of shipping almost always exceeds the cost of sales taxes. Therefore, there is no inherent pricing advantage given to remote-sellers by not collecting a sales tax. And in fact, the outbound shipping costs might place remote-sellers at a disadvantage in this area already.

Conclusion
Online retailers should focus on improving their ‘Selection’, ‘Pricing’, and ‘Convenience’. Retailers that excel in these areas will attract customers at greater rates than those that do not. Retailers should also inform potential customers of their strengths in these areas whenever possible. Additionally, retailers should not assume that the non-collection of sales tax provides them with a material advantage.

It is also important that online retailers understand how they are performing in the eyes of customers. A post-transactional customer survey, such as that provided by Shopper Approved, can help online retailers by providing them with instant feedback regarding how they’re doing and ways they can improve. Post-transaction surveys combined with customer ratings can also give potential new customers valuable information and confidence during the purchase process.

 

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8 Responses to “Why Customers Shop Online – A Shopper Approved Survey”

  1. Big retailers have huge advantage over smaller online sellers in regard to lowering shipping through massive shipping – rates astronomically decline. If a small business backs off of strong shipping for even one month, they lose their discounts.

    Once again, because big box retail not only controls most of the Internet and would not be affected by the MFA, the shipping variables only strengthens the benefits that MFA would have for the big retailers – puts them essentially on the same level field as local shopping, particularly if they can delivery within 8 to 24 hours – the new war among big box retailers.

  2. […] Approved recently ran an expansive study on why Why People Shop Online. They implemented a post-transaction survey on over 200 online stores and they asked over 25,000 […]

  3. Joel says:

    Thanks for collecting and publishing this survey.

    Our online store operates in Oregon – which has no sales tax. So the idea of collecting sales tax for every other state in the US is troubling. It would be a great burden for a small family owned business that is trying to grow by offering the quality service that our customers cannot find locally. Most of our customers live in rural locations where they have few to no alternatives except online.

    Lets hope that this data will help our lawmakers draft fair and reasonable laws.

  4. Nice and very helpful survey. It will really help us to measuring our valuable customer’s satisfaction. As a computer parts online retailer we have taken this survey result very seriously to improve our customer service and to gain their focus. Thanks.

  5. Bill Miller says:

    Interesting and surprising results — for most industries.

    However, unlike “box” items, my industry — Flowers — has been decimated by National Flower marketers. The reason is twofold.

    First, they have no COGS since they electronically transfer all their orders to REAL florists (after subtracting a 30% commission and a $15 handling fee.)

    Second, with few exceptions, they do not charge Sales Tax, exacerbating an already difficult situation.

    I can’t help but wonder if the survey results for Flowers might differ from those noted in the main survey.

  6. Mike Targett says:

    Great article! Thanks to you guys for taking the time to run this survey and publish results. Very useful information.

  7. McKane Davis says:

    This is a great survey and underscores the fact that people don’t shop online to avoid sales taxes en masse like proponents of the MFA claim. This really cuts down and refutes the whole “fairness” claim because there is no inherent pricing advantage to selling online vs selling locally.
    Also appreciate the great ideas for how to improve the convenience of shopping online. That is an area where online retailers can continue to improve.

  8. Thank you so much for arranging this survey. It absolutely confirms everything we have heard from our customers about the reasons they shop online.
    It is imperative that everyone understand that this bill should be called the “Amazon and Big Box Retailer Protection Act,” because that is exactly what the outcome will be if it is passed. While our business is supposedly exempt, we are sure that when the expected increase in revenue fails to materialize, the law would be expanded immediately.

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