E-commerce analysts are predicting a bumper Christmas for net shopping. This year, for the first time, seasonal revenues in the EU are predicted to exceed those in the US. Forrester Research anticipates that festive shopping online in western Europe will bring in 13 billion euros, compared with 10 billion euros in the US -- a 44 percent increase over last year.
The UK still leads in Europe, with 32.4 percent of the overall market. And according to a UK-based survey by the Interactive Media in Retail Group (www.imrg.org), Brits will spend ?4 billion online this Christmas. But larger economies (Germany and France) are catching up and are expected to outpace Britain in the next five years. That's a sign the e-commerce sector is maturing, something borne out by Forrester's predictions that clothing will be the second most popular online Christmas purchase this year -- just behind travel. The conventional wisdom used to be that people would never buy clothes online. Now, with many catalogue retailers online, clothing is expected to account for 17 percent of total online sales across Europe over the holiday season -- outpacing things such as groceries and alcohol.
ILLUSTRATION: MOUNTAIN PEOPLE
Just as the market is growing up, so net shoppers are becoming smarter. Five years ago, when people first began to buy online in significant numbers, smart shopping meant knowing how to negotiate an online check-out. The past two years, however, have seen the rise of a new sort of consumer. Just as retailers now use multichannel sales strategies (online, the high street and more), individual shoppers now use
everything the net has to offer -- including shopping sites, individual sellers, reviews from consumers and price comparison tools -- to get the best deal.
More than ever, there are bargains to be had. UK Online Centers, a government initiative aimed at getting more people to log on, estimate that Christmas shoppers could cut a third off their bill by using the web. Those relying on the high street risk missing out on "a potential ?6 billion of savings over the festive season."
These rather vague figures are aimed at people still unconvinced by the net. In contrast, smart shoppers know about online savings -- but they are just as likely to take the prices they get online to the high street and haggle for an even better price.
"Two years ago, the empowered consumer was just an idea. Now it is real," says Hellen Omwando, European consumer markets analyst at Forrester. "The net gives them access to information they didn't have before, about product availability, choice and, more importantly, pricing."
In the future, shoppers will probably rely on tools such
as Froogle, Google's price
comparison tool. They can also
turn to sites such as Kelkoo (www.kelkoo.co.uk), the shopping search and price comparison
site, and UK Shopping.com (www.uk.shopping.com), which launched here last summer. The latter features the price comparison service DealTime, along with product ratings and information written by individual buyers from Epinions, the US consumer review site.
"Many of the first price comparison services didn't really work," says Ehud Furman, managing director
in Europe for Shopping.com. "But we think DealTime is now delivering value for both retailers and consumers."
DealTime searches more than 1,000 sites and aims to provide around 35 to 45 offers for every product search.
Furman says that Shopping.com has been tracking the evolution of the informed shopper over the past two years and will create services for them. On the UK site, users buying via recommendations can rate the retailer, eBay-style.
"Sites with high ratings are already showing higher conversion rates -- people who visit them are more likely to move on to an actual purchase," says Furman.
However, the range of reviewing options available on Epinions may take a while to arrive on UK Shopping.com.
Smart shoppers would seem to be driving up online revenues, but some analysts also think their emergence poses a problem for traditional retailers. They argue that informed consumers take less notice of traditional one-way advertising and are much less loyal to old-style brands.
"New technology lends the disloyal a hand," says Omwando. "It is a great way for consumers to switch easily between different providers."
Pricing is critical for smart shoppers, she says, mainly because "a lot of the products in the market nowadays are the same. In the past, one product might have been superior to another so there were reasons to be loyal. Now, it is difficult to find products that are just bad. Plasma screen TVs from Sony and Philips are similar."
Consumers know this and hunt around for the best price, or for the retailer that gives something more, or an opportunity for customization.
Low price is one way to draw smart shoppers, but businesses that want to retain them should find ways to work with the social networks many smart shoppers develop and rely on. Indeed, these social networks might ultimately let businesses collaborate with smart shoppers to improve their marketing strategies, says Viki Cooke, joint chief executive of Opinion Leader Research (www.opinionleader.co.uk). Surveys done by the company indicate that while people are suspicious of authority in all forms -- from politicians to big corporations -- they do trust their peers.
"Organizations need to understand how influence works," says Cooke. "It is not about power and authority any more. It is about people's ability to persuade people just like themselves. There are social influencers in any given network, who are persuasive about the things they believe in. They have more sway because they are accessible, they're using your own language, they're relating products and ideas to lives like your own."
Leading online retailers have always known this. EBay's rating system uses individual customer feedback to inform the shopping experience. Similarly, Amazon has individual reviews and product recommendations generated by collaborative filtering tools (in which purchases made by consumers who bought the same items as you, are used to generate new product suggestions). As Amazon.co.uk's group product manager Rakhi Parekh says, it can be a useful Christmas shopping tool.
"Say you are looking for a present for a relative. You know they like a particular book. By seeing the things other people who liked the book also bought, you can follow a trail and find something that is going to work as a present," Parekh says.
But there are potential pitfalls. Many smart shoppers like recommending items to others.
"But you can't overtly sell to them," Cooke says. "They have to want to buy. They will pick information from all sorts of sources before they do."
"Word of mouth can be risky for marketers," Omwando says. "If you try to cheat consumers by paying other consumers to talk up a brand -- if that comes out, the backlash is terrible."
Instead, companies should provide smart shoppers with venues where they can review, compare and recommend products to others. There are
some innovative sites such as Tremor.com, an online marketing site run by Procter & Gamble, which sets out to be a home for teenage trendsetters, who get access to new products and ideas in return for their input. In addition, companies should listen to the conversations people are having on weblogs and social network sites.
Omwando recommends using tools such as Feedster (www. feedster.com) to aggregate the conversations consumers have online about products.
There is perhaps an opportunity for social networking services looking to generate some revenue. TakeYub.com was bought this summer by Buy.com, the online retailer, and has been relaunched. Yub is "buy" backwards and stands for young urban buyer, the site's target market (its strap line is "Meet. Hang. Buy.").
According to Yub.com president Jared Morgenstern, the site lets members create lists of brands and products they like. If friends buy via a link, the member recommending the product gets a cut, and the buyer gets a discount. Yub.com attracts shoppers, keen to earn money from reviewing and recommending, along with general consumers.
"Individuals can become friends through profile sharing and chatting. Therefore their recommendations are more significant than what a company promotes through traditional marketing," he says.
He argues that the site is a great place for businesses to find out what people think of their products. There is a risk, of course. If they don't like something, shoppers don't hold back.
"Because of the risk element," says Omwando, "companies have shied away from social networks. It is mainly because they don't have control over the process. What we are saying is it is hard to have control. So sit back, manage the process and let consumers take direct control."
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