In its second-largest acquisition, Amazon buys the company for $970 million.
Retailers must understand shopper motivations, writes a consultant in a new book.
What leads a consumer to shop online rather than in a store? It depends who she is and what she’s shopping for, and retailers must understand how shopper motivations vary in order to craft successful strategies, writes consultant Susan Lee in a new book entitled “It’s time for e-commerce to grow up.”
Lee, a partner at consulting firm Simon-Kucher & Partners, argues that low prices alone won’t bring consumers back into bricks-and-mortar stores. Instead retail chains should focus on how they can deliver value to consumers. “We’re a big fan of value, and not a big fan of using price, price, price to go after consumers,” Lee says.
She says many retail chains assume they have to compete with web retailers on price because they believe consumers mainly shop online for low prices. But Lee says a survey of 1,000 consumers her firm conducted shows that the importance of price varies by category, and that across all categories price becomes less important as consumers shop more on the web.
For comparison purposes, Lee examines four broad categories of products:
- Vanguard: books, entertainment products (including movies and music) and consumer electronics
- The New Frontier: clothing, toys and sporting goods
- Routine Commodities: laundry, household cleaning and paper products
- Meal Ingredients: food and beverages
Price is the most important driver for shopping online in the Vanguard category (cited by 24% of respondents) and New Frontier (18%). But for Routine Commodities free shipping was cited as most important (16%) followed by the convenience of 24/7 shopping (15%) and price (14%.) In the Meal Ingredients category, the most-cited choice was more variety (14%), followed by lower prices and free shipping (both 12%).
What’s more, Lee notes, among the most active online shoppers price is less of a factor. For example, when asked why they plan to shop online more for clothing in the next year, these active web shoppers most often point to being able to shop whenever they choose (63%). That was followed by more variety (52%), free shipping (48%), site “remembers” me (48%), and enjoyable shopping experience (48%), with price (46%) in sixth place.
Another reason why bricks-and-mortar retailers should not focus on price, Lee says, is that they can’t compete with the low overhead of online retailers, many of which, such as Amazon.com Inc., have built web sites that make completing a transaction easy. Instead, stores have to combine their own e-commerce sites with two assets web-only retailers don’t have: store associates and the fact that a shopper in a store is surrounded by product.
She encourages retailers to consider the milestone in a consumer’s life that’s leading her to buy a product. If she’s buying a blender, is it because she’s moving into a new home, just got married, has a new baby? A consumer who goes into a Home Depot store looking for a gallon of paint can also be sold brushes and other items required for a project if store employees take the time to understand what the consumer is trying to accomplish. “Before you know it, you’re leaving the store with $200 worth of stuff,” Lee says. “They’ve inspired you to do a home improvement project while you were going to the store to buy a gallon of paint.”
While Lee, who admits she is a member of Amazon Prime and buys all her books at Amazon, addresses the book to store-based retailers, she’s published it in digital form as an electronic book. It’s available at Amazon for $12.95 and will soon be available on Apple Inc.’s iTunes store, a Simon-Kucher spokeswoman says.
Amazon is No. 1 in the Internet Retailer Top 500 Guide, Apple No. 3 and The Home Depot Inc. No. 46.