Consumers purchased $190 billion in products and services through direct channels in 1998, and that number will hit $438 billion to $1.1 trillion by 2010, according to a research study conducted jointly by Peppers and Rogers Group and the Institute for the Future.
Three-fourths of the consumers surveyed have used at least one direct-to-consumer channel for ordering products and services. And while phone and mail remain popular for ordering direct, a large percentage of the business conducted over those channels will migrate to the Web in the next decade. In addition, today’s direct purchasers will increase their usage of all channels in the next 10 years.
Direct shoppers tend to be younger than non-direct shoppers, own a PC, and have young children at home. They are also better educated and have higher average incomes than non-direct shoppers. Similarly, users of newer direct channels track higher in both education and income than buyers who shop through paper catalogs.
The reasons people buy direct vary by channel. Online shoppers value the ability to manage their time, while direct grocery shoppers – the heaviest users of consumer direct – value convenience the most.
Only 6 million households are now heavy users of e-commerce services (including grocery delivery). But by 2010, that figure should go up to 20 million, accounting for 9.4% of all consumer direct retail sales. And it has the potential to reach 24%.
Factors driving that trend include rising education and income levels; increasing technology expertise among teens and seniors; heightened desire among consumers for customization and interactivity; cheaper and better technology; and greater high-tech penetration in homes.
Use of new direct channels will at least triple over the next 10 years, from 11% today to 33% or more, while use of mail and catalogs only will decline from 67% to 50%. Broadband and non-PC access to the Internet, as well as new payment methods, will fuel that growth.
As consumers embrace the convenience and flexibility provided by ordering direct, the desire to examine products prior to purchase – as well as concerns about privacy – will decline.
A NEW SHOPPING MODEL
The rapid growth of consumer direct sales will fuel new entrants and new business models, create new partner alliances, and blur channel lines. As a result, the majority of consumers will toggle between channels based on what meets their needs at a given time, rather than wed themselves to a particular method.
In fact, a growing number will explore more than one channel in the process of making a single purchase (i.e., researching a home or car online but purchasing it in person, or ordering a product over the Web but picking it up at a retail outlet).
Look for leading consumer direct companies to become more one-to-one oriented. They will make suggestions, issue welcome reminders and provide automatic product replenishment.
Over 25,000 households – including 500 with teenagers – were surveyed for this research. In addition, interviews were conducted with catalog, Web and online grocery shoppers in the survey sample, and with direct marketers.
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