Market Research Spotlights Web Commerce

Posted on by Chief Marketer Staff

Internet watcher Forrester Research Inc., Cambridge, MA, launched a service April 28 called On-line Retail Strategies to focus on Internet selling.

The service kicked off with-what else?-a study. The bottom line, says Forrester, is it’s time to stop fooling around with getting people to visit your site, and to start getting them to actually buy stuff.

Online retailers did $2.4 billion in business in 1997, but only one in five adults online made a purchase.

Forrester talked with 75 online merchants responsible for $1.5 billion of those sales. Nearly half do not know their conversion rates. For those that do, the average is 2.7%-close to the average for direct mail. David E. Weisman, Forrester’s group director of new media research, thinks it should be higher. “It’s low because this is somebody who actually came to your store and didn’t buy,” he says.

Forrester has come up with a concept it calls the “look-to-buy ratio,” defined as “a blended average of first-time and repeat buyer conversion rates.” Obviously, a company with a higher rate will grow faster and obtain a higher market share.

So where are the pitfalls? Too many sites are hard to navigate, he says. Online merchants should pay attention to the number of pages consumers look at per each SKU they buy. These will vary according to industry, so that, for example, on a grocery site a good range is between 1.3 to 1.7 pages per SKU, and on a computer site, between 6.2 and 9.2.

Forrester finds that security is still a big issue and first-time buyers are nervous Nellies. Smart sellers will offer something small that surfers can use to test the waters.

According to the study, up to two-thirds of shopping baskets are abandoned before buying-mostly because checkout takes too long or shipping and handling costs are hidden until the end. Discarded carts should be closer to 10% of first-time shoppers and 5% of repeat shoppers, Weisman says.

As for loyalty, Weisman believes the ratio of repeat to total visitors should now be 15% to 25%, which is relatively low because the market has yet to mature: “You need to drive traffic but you’ve still got to focus on loyalty. When the market matures, loyalty will matter more.”

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