The Emerging Online-Offline Paradigm

Greg Sterling, Program Director, Interactive Local Media

• 2004 Q4 e-commerce was $21.4 billion (22% increase over 2003 Q4)

• A big number but only 2.2% of U.S. total retail sales

• Total 2004 e-commerce was valued at $69.2 billion

• That was still only 1.9% of U.S. total retail salesSource: U.S. Commerce Dept.

E-Commerce: Big Yet Small

• 39% of U.S. consumers have made a local purchase after Web research (Dieringer Research Group for ShopLocal, 2005)

• 92% of purchases influenced by SE usage in the Consumer Electronics/Computers category were made offline (comScore, 2004)

• 74% of 7,300 survey respondents say they research online then buy offline (BIGresearch, 2005)

• 62% of U.S. online consumers prefer to buy offline (Forrester Research, 2005)

• Majority of 61 million U.S. car buyers in 2004 used the Internet as part of the process (Borrell Associates, 2005)

Internet Having Larger Influence on Offline Buying

• Among media consulted for local shopping, the Internet is now equal to or greater than traditional newspapers and Yellow Pages

• Internet now rated higher on 10-pt excellence scale than traditional, offline media

• Search is the dominant category among Internet media used for local shopping

• For purchases over $500, 34% of survey respondents started product research online but 90% transacted offline

• Why: 57% of U.S. home Internet users now have broadbandTKG-ConStat: March, 2005 (n=501)

New TKG Findings: Local Internet Growing, Esp. Search

The New Consumer: ‘Anatomy of a Purchase’

• Want to illustrate in a concrete way• Actual purchase-process example• Anecdotal but representative• Consumer: We’ll call him Doug

Purchase of Mac Mini Triggers Need for a New Printer

Step 1: Research with a Trusted Source

The Lucky Product:Ready for E-Commerce?

Click:From CR to Yahoo! Shopping

It’s Simple Now, Right?

Compares Shipping Costs and Merchant Ratings

Lack of Confidence:Back to the Internet

• Doug clicked on several merchant sites• Found what he considered inaccurate or

manipulated price information (using rebates)

• Decided to look for alternative vendors

Product Name Search on Google for ‘Canon Pixma iP4000’

Click: Organic Search ResultPC Magazine Review

Confirms CR Rating, Back to Looking for a Vendor

• Returns to Google search results• Clicks on sponsored links (he knows

they’re ads and isn’t troubled because he wants to buy the product)

• Clicks on 6th link (PriceGrabber) = $0.24 (4/17 YSM)

PriceGrabber 6th of 8 Links: ‘Intrigued by the Name’

Locates a Potential Vendor

• Uses PriceGrabber to calculate total cost

• Selects a low-price vendor: Digital1234.com

Digital1234: Ready to Buy but Return Policy a Problem

• Doug traverses the shopping cart screens

• Credit card information input, ready to click/place order . . .

• Notices restrictive return policy• Abandons cart

Multiple Clicks Ensue

• Returns to process later that day• Conducts same product-name search on

Google to duplicate results• Clicks several of the paid links, including

Amazon (3) and BizRate (4) • Finds what he considers more

misleading price information

Revises Plan: Looking for a Local Store

• Wants the ability to return product locally rather than shipping it back if defective

• Wants the printer sooner; doesn’t want to wait for delivery or pay higher shipping costs to accelerate

• Decides that paying $20 - $30 more is worth convenience and confidence

Goes Directly to Familiar Retailer Web Site

Google Search: ‘Best Buy Coupons’

Climax: The Transaction!

• DealCatcher site sends Doug to deep link w/in Best Buy site

• Need to create account for discount• Creates account: difficult process• Makes online purchase ($152 vs. $122

online) and selects “in store” pick up• Convoluted e-mail confirmation process

compels wait

Endgame: In-Store Pick Up

• Inventory not available at first choice store

• Calls toll-free number and speaks with operator after local store closed (9pm)

• Receives e-mail confirmation of in-store availability next day (at second-choice location)

• Drives and obtains printer

• Internet being integrated heavily into consumer research/buying behavior, incl. Local

• BB users relying on Internet as a powerful and often primary shopping tool, depending on category

• Local consumer behaviors are now more complex, creating new complexity for marketers – esp. local SMEs

• Question: Where to put ad dollars online to engage consumers at strategic points in the buying cycle

What Does This All Mean?