Behind technology improvement and a generation of shoppers that appreciate value, convenience and options, online shopping has been growing steadily over the past years. This represents both an opportunity and a challenge for retailers and the industry. In this article we explore how shoppers behave when purchasing online.
Consumers today are making purchases decisions everywhere and anytime. Competition no longer limits to local businesses open during working hours but is rather a global market open 24/7. The challenge for retailers then is to be able to understand and respond to where and when shoppers are making buying decisions.
KPMG has done an international research including more than 18000 users worldwide who had bought online at least once during the past year. Through this study we were able to extract several conclusions regarding online shopper behavior.
Geographic and generational trends
While online shopping is a growing trend, it varies significantly in terms of geography and GDP per capita. So, consumers from North America, Asia or Europe buy online more frequently than shoppers from Latin America, Russia or Africa.
In terms of age, Generation X (i.e., people born between 1966 and 1980) are the ones who made most purchases online while the previous generation, the Baby Boomers, where the ones that spent the most. This may seem counterintuitive at first since the Millennial generation is mostly identified as the technological generation. But these results are strongly related with the life stage and income levels that the most senior generations have. As Millennials become more stabilized economically, their online sales, both in terms of amount and quantity, are expected to rise above previous generations levels.
The categories that grew the most from one year to the next were the ones that don’t require trial or where consumers trust Brand and product quality the most. This is why FMCG categories have so much potential for growth online, since many products fit perfectly with these characteristics.
Regarding the way they access to purchase, despite worldwide proliferation of smartphones, still computers, either desktop or laptop, are the most widely accepted way to close online purchases. More than half of the users still prefer this option when purchasing online. This is even across all regions except for China, where #1 choice is smartphones. This of course has to do with the high penetration that this type of phones have within the population.
Nevertheless, the use of smartphones is in full growth and is a key element to be able to maintain consumers well informed. More than two thirds of the surveyed population claimed to have used a smartphone while being in a physical store to search for product information. They look to compare prices, additional product information and reviews from other users. Mobile influence is expected to be even bigger in the future. According to Kantar WorldPanel, by 2021, 80% of internet traffic will be videos and 94% of these will be consumed via mobile.
The path to purchase in eCommerce
The traditional path to purchase concept also exists in the digital world. Except that instead of being linear as it is offline it presents itself in a rather cyclic or even web like shape. The path to purchase has 4 stages: i) awareness, when consumers realize they have a desire for a product; ii) consideration, when they start researching; iii) conversion, when they decide when and where to buy and iv) evaluation, which happens after the purchase. In the online world, shoppers go back and forth and in and out of each stage many times along the process.
Regarding awareness, almost 60% of the interviewed stated that the initial source of awareness for them had been an online channel. However, physical stores came out in second place, cited by almost 25% of people. What this determines is the need for an omnichannel strategy since both online and offline channels are effective to create awareness, especially when they are able to work together synergistically.
For the consideration stage, online reviews and company’s websites were the most cited as sources of information. Particularly in Latin America, more than 50% claimed they search online for product reviews or company’s websites for more information.
Aspects that influence the purchasing decision
Generally speaking, price and promotions are the elements that influence the most when choosing a brand or product online. Following are product characteristics and brand reputation. Nonetheless, in certain categories such as beauty care and cosmetics, brand reputation comes out first in importance for shoppers.
In our region, almost a third of the surveyed consumers put prices/promotions as the key element when making a purchase choice. Online reviews, though growing, still represents a smaller than average percentage (only 13%).
Finally, for the conversion stage when the decision of when and where to close the purchase, price still remains as the key factor with 36% of favorable responses. Important to note, older generations would rather purchase from their known website regardless of the price. Millennials are the ones that check out for prices before deciding.
Evaluation is becoming a critical stage in the process
Feedback from users today is a critical part of the process. Millennial shoppers are the ones that generate more reviews after buying and in Latin America already 32% of users make an online review after purchasing. Buyers web pages, Facebook, Brand web page, WhatsApp and increasingly Instagram are the most used media for feedback. Most of the reviews are positive so they are critical to generate loyalty and purchase repetition. This is why companies should somehow include these feedbacks into their marketing mix models.
Short purchase cycles leave little room for retailers and the industry to influence the purchasing decision. In the case of FMCG, 80% of purchases are made within the same day or, at the most, the same week. Purchase cycles get longer as item prices get higher and are bought less frequently. Consideration stage is frequently skipped when consumers are purchasing products that they already know and buy frequently, they move directly from awareness to conversion. So, the challenge for brands and retailers is the be at the right time and moment with the correct price and positive reviews to ensure consumer choice.
What’s driving the change to online purchases?
The vast majority of the surveyed claim that time saving, flexibility and costs are the main drivers for online purchasing. Some also mentioned as a reason that they want to avoid the negative experience that physical stores sometimes generate such as long lines at the check-out or the huge amount of people they usually run into in a store. People that still prefer offline mentioned they want to touch, try and verify product appearance before buying.
Winning online consumer
While Price and promotion were the main attribute cited when deciding where to buy, there are a few other very important factors to consider such as delivery options, return policy and payment methods. More than a third cited these as very important when choosing.
Specially for the new generation, delivery will be crucial since they want instant gratification and they are not willing to wait too long. According to Kantar, they are also the ones that have less time to make the purchase.
Payment options is substantially important in our region, even above return policy. This is mainly due to the low penetration of bank accounts (less than half of the population has access to credit cards). Alternative payment methods such as cash, click & collect or Pago Fácil extend the percentage of population with chances to access online purchase.
Confidence is key
Given the nature of online shopping, where consumers buy without having physically seen the product, they have to leave their personal data and even pay before they receive their merchandise, having a site in which they can trust is critical. When they were asked which were the attributes that made a site trustworthy, most of them answered that it should be easy to contact someone within the company. This is a way to complement the lack of human contact that online purchase has vs offline. Consumers like to feel that there will be someone out there who can help them in case they have an issue. Those companies that are able to provide excellent customer support will be rewarded with their loyalty.
The challenge for the industry and for retailers then lies in finding the way to provide excellent level of customer support to be able to rise to the challenge that ever-rising consumer expectations present. And doing so in a profitable way. It is an omnichannel challenge!