Whether the economic recovery is around the corner or a couple years off, eCommerce will continue to grow. To gauge how well online retail will withstand a prolonged recession, Forrester’s Consumer Technographics® surveyed nearly 9,000 online consumers on their buying habits and spending across various product categories. The findings revealed that eCommerce will grow through the downturn because the high income that most Web buyers have has thus far insulated them from the economic turmoil in the US. In addition, many product categories that helped stimulate eCommerce growth in the past couple years are the same product categories in which consumers have already decreased their spending because of the poor economy.
“The good news is that the 16% of online consumers have already decreased their household spending only make up 14% of total Net sales,” said Christopher M. Kelley, analyst at Forrester. “Demographically speaking, they are not the most prominent consumers because they have the least amount of money to spend. Furthermore, 19% of Web buyers highly affected by the downturn are ambivalent toward technology at best and are less likely to turn to the Web as a preferred shopping channel.”
Thirty-six percent of Web buyers are cautious, but at this time they have only decreased their household spending slightly. This group of shoppers is concerned about eventually being affected by the economic situation and currently make up 33% of eCommerce spending. On a positive note, 48% of Web buyers are unconcerned about the economy; these consumers are relatively affluent compared with their counterparts, and, therefore, are more attractive customers. They are not concerned that the current economic instability will affect them and are responsible for 52% of total online spending.
Another factor that will guide the overall direction of eCommerce is product category. Although consumers have also decreased spending on entertainment products, including music, videos, and home décor, their frugality won’t have a significant impact on overall eCommerce revenues because entertainment products are not big revenue generators. Staple goods also generate a small amount of revenue online, so although consumers will not curb their spending much on these goods, the overall impact on eCommerce growth from these products is negligible.
Ironically, travel, the product that has been the darling of online retail, is now the biggest threat to eCommerce. While travel has been the biggest revenue generator, it is now an expense many Web buyers forgo during unfavorable economic times. Similarly, computer hardware and consumer electronics bring down online shopping numbers because consumers are more likely to put off expensive purchases during a poor economy.
“Online retail is projected to reach more than $74 billion in 2002. This amount could change, however, if the economic slowdown turns into a long-term recession or if the economy makes a miraculous recovery in 2002,” added Kelley. “If things worsen in the coming year, consumers will tighten their budgets further, but eCommerce still won’t shrink. Conversely, if the current economic storm passes early, eCommerce will experience substantial growth in 2002.”