Online Penetration Is Maxing Out

(Direct) It’s happening any minute — that big surge of online shoppers we’ve all been waiting for. Right?

Not so fast.

Growth has flattened out, and “there simply won’t be many new people buying online,” said Patti Freeman Evans, Jupiter’s senior retail analyst.

On the positive side, per-buyer spending is going up. And nearly half of all U.S. retail sales will be conducted or influenced online. That will total more than a trillion dollars, she said, citing a new report from Jupiter.

But there will be a cap when it comes to so-called wallet shift. Most online shoppers buy in only 4.7 categories (compared with 4.3 a few years ago).

“That’s not the growth you intuitively expect would happen,” Evans said, speaking at this year’s ACCM conference in Boston.

Four groups will produce 92% of all online sales by 2011, Evans continued: middle adults, college students older adults and younger adults. But those groups will have reached the saturation point.

“Getting up to 95% going to be really, really tough,” Evans noted.

Even young people won’t be jumping on board. By 2011, 72% of all college students will shop online. But that number is already at 69% .

“We don’t expect to see dramatic growth,” Evans said.

Then there’s teenagers. Teens will spend more online than their older counterparts did at that age, but not dramatically more. And they won’t necessarily jump in as they get older.

“Once they grow to be 20 or 23, there’s no change in their propensity to buy online,” Evans said. “That gives us pause.”

As now, the biggest spenders online will be “affluents,” those with household incomes of $75,000 and more. They will account for 48% of all online sales by 2011.

But their numbers aren’t growing. Roughly 71% now buy online, and that will grow by only 3% within the next five years.

“That means we’re in more of a competitive environment than we thought,” Evans continued.

She added: “That’s a scary thing.”

And gender? “Men and women, despite what you’ve heard, are pretty much equal in terms of online shopping,” Evans said.

Men still spend a little more because they spend money on high-ticket products like electronics. But younger women are becoming more likely to purchase online so that “in 15 years, there may be a little bit of a shift,” Evans added.

Meanwhile, Caucasians are still the predominant ethnic group.

“The biggest online group is Hispanics, but their average purchasing power is lower,” Evans said. “Asians are 6% of the population but account for 8% [of all online sales], so they have a higher average order value than Caucasians.”

As in the past, one inhibitor is that people “continue to be scared about online transactions.”

But shopping is one thing. Using the Internet to research sales is another, and that activity is going to grow.

What does influence mean? It could mean looking at a store locator, searching for a company name, or “spending weeks and weeks researching a small cable, like my husband does,” Evans joked.

She noted that 82% if offline users already conduct research online.

“The challenge is for you guys is understanding the impact of the multiple touchpoints that customers may experience, and how they impact each other.”

Analytics firms are already working on ways to attribute influence.

“Online, you now pay for the last click, and you’ll be doing that for awhile,” Evans notes. “Soon, you will be able to assess the impact, and we’ll have smarter metrics.”

When that happens, you might pay one percentage to Google, and one percentage to another search engine.

“It’s not sexy, but it will give you a better sense of the impact of what your effort will be in the market,” Evans said.

She advised retailers to make greater use of analytics and to measure things that many retailers don’t even look at it.

How? Evans urged multichannel merchants to use a goal-driven approach and hypothesis-driven metrics.

“Say free shipping is not creating enough incremental revenue to offset costs,” she said. “You’re going to test it. You know what metrics you need to know.

It’s the same thing with the checkout, arguably the most important Web site experience. “If the goal is just to get them through, you’ll look at different metrics than if it’s to increase purchases.”

How do you do all that without the disrupting the flow of your company?

“You have to disrupt the flow of your company,” Evans answered.

The ACCM conference is cosponsored by Multichannel Merchant (sister publication of CHIEF MARKETER) and the Direct Marketing Association.