January 19, 2001, 12:00 AM

Consumer-Direct Sales On The Rise

The consumer-direct channel will generate one of the largest-scale shifts in economic history, accounting for 12% of all U.S. retail sales by 2010, according to "Consumer Direct: Shopping Behavior in the Age of Interactivity," a new study by Stamford, Conn.-based Peppers and Rogers Group and the Institute for the Future.

The consumer-direct channel, which includes catalogues, direct mail, interactive television and online, will be an increasingly important source of information and assistance for shoppers making purchasing decisions, it says. As a result, by 2010 the channel is likely to affect more than 24% of all U.S. retail sales. Total consumer-direct revenue went from $115 billion in 1998 to $133 billion 1999, accounting for nearly 5% of retail sales, says Peppers and Rogers.

"The increasingly hybrid nature of shopping is blurring the lines between traditional and consumer-direct sales channels," says David Halek, director of the project at Peppers and Rogers. "The critical factor in defining a consumer-direct transaction is where the goods are ultimately purchased, not where they're delivered or picked up. Consumers are learning to bundle consumer-direct and bricks-and-mortar shopping experiences to make their buying decisions, so even though a purchase may occur at a local store, the actual product selection might take place online or through a catalogue."

And online will have an increasing share of retail sales, Peppers and Rogers says. Some 83% of U.S. consumers made a purchase through direct-to-home shopping channels during 1999, and 25% of this group bought products online. Through 2010, within the consumer-direct channels there will be a dramatic shift toward online activity, despite a healthy pace of shopping in offline channels, such as catalogues and direct mail.

Brick-and-mortar retail establishments will "respond in force" to the rapid growth of remote shopping and the impact the consumer-direct channel will have on their businesses by improving their offerings and the convenience of shopping at their stores, speculates the report, which indicates that a "significant" part of a revitalized bricks-and-mortar strategy will be to link physical stores more closely with the consumer-direct channel.

Other key findings of the Peppers and Rogers report include:

  • Cash-strapped dot.coms are consolidating as the consumer-direct channel matures to meet growing consumer need through personalized, one-to-one offerings.
  • Remaining online merchants are building scalable logistics and delivery models to suit the changing needs and expectations of their customers while sustaining their own growth.
  • Interest in automatic replenishment among the most sophisticated group of consumer-direct shoppers ranges from 40% for household items to 60% for prescription medicines. Automatic replenishment services can either remind the consumer about items they are likely to run out of soon, or can automatically purchase and send the items the consumer needs. Consumers generally are more interested in a automatic replenishment model in which they maintain control by receiving a reminder of items they are likely to run out of soon and have the opportunity to accept or decline shipment of that item.
  • Consumers are coming to expect companies to deal with them as one customer across all channels.
  • Drugstore shoppers are the most likely group to search for an item online but complete the purchase in a store or on the phone.

     Increasing numbers of U.S. consumers are trying consumer-direct channels for the first time for many reasons, including unique items, free shipping and time savings. Some 72% of catalogue/mail shoppers and 50% of online shoppers said one of the top two reasons they tried the channel for the first time is because it offers items they cannot find at stores; 35% of catalogue/mail shoppers and 24% of online shoppers were also enticed by free shipping offers; and 84% of consumers who have tried online grocery delivery services such as Peapod said that one of the top two reasons was to save time shopping.

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