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Random Musings
Vol. 1, No. 3: Online Shopping: Bankruptcy Is Just a Mouse Click Away

Random Musings is a collection of opinions, commentary, humor, satire, information and other thoughts escaping from the cluttered mind of the not necessarily well-informed Gerald "grsamf" Smith concerning news and events in the world of computers and their use.

Introduction

Undoubtedly, the majority of people reading this article have bought computer components online, probably several times. It is not, however, just the computer enthusiast who is shopping online. Ecommerce now accounts for approximately 2% of all retail purchases. Airline tickets, hotel reservations, and other travel related purchases account for the biggest share of online spending, but it is indeed hard to find a purchase that cannot be made sitting at one's computer.

Shopping online is not without its problems. In addition to the fact that many people spend considerably more money when shopping online than they would at a store, other problems, such as fraud, identity theft, resolution of difficulties arising with billing or unsatisfactory products, and other customer service issues present unique problems.

This article will briefly examine the increasing volume of online shopping and discuss some of the pitfalls and solutions.

The Numbers

The number of people shopping online and the amount of money they spend has grown dramatically over the past few years. Reasons for the growth of online purchases are varied, but convenience is probably the biggest factor. A buyer does not even have to change from her pajamas to order online. Comparison shopping is easier and less time consuming. Many businesses have customer comments, perhaps of questionable validity, telling prospective buyers of previous experiences. Sellers, of course, like online shopping for the simple reason that it significantly reduces their overhead. Many vendors pass part of the savings on to purchasers in the form of reduced prices for online purchases.

Most of the following statistics are for online shopping in the United States. Given the almost obsessive interest in surveys and statistics displayed by the US government and its citizens, the figures for the States are both more extensive and more readily available. Similar statistics from Great Britain, France, Germany, and other European nations, as well as Australia, New Zealand and others indicate that while online shopping is not as epidemic in those countries as in the US, the rate of growth is similar. Actual figures are impossible to determine and the numbers are the results of surveys and polls among individuals and studies of records or etailers.

As reported by eMarketer in July of 2004, almost three-quarters of internet users over the age of 13 in the United States shop online. That number is expected to grow to 80% by 2007. Among the entire adult U.S. population, many surveys have concluded that well over half shop online, with that percentage jumping to over 70% for people under 30. Among people making purchases for the school year beginning in the fall of 2004, almost two-thirds made clothing purchases online while over half used the internet to purchase books and supplies according to FeedbackResearch.

AOL reports that males spend more online than females by a margin of $204 to $186 per month. December holiday shopping online cost the average male $326 in 2004 compared to $284 for females. These averages were the result of an online poll and reflect the habits of slightly over 6,000 respondents. Despite AOL's claim of scientific reliability, the numbers would indicate these respondents engaged in online shopping more heavily than the average person. For example, assuming online shopping accounts for 2% of total retail sales, AOL's results would indicate that males spend an average of more than $10,000 a month or $120,000 a year on retail purchases. If the underlying conclusion that males spend more online than females is correct, it may give some credence to the stereotypical belief that males have a genetic aversion to shopping malls.

An interesting statistic is that nearly half of both male and female shoppers in a survey by Cyber Dialogue said they made their online purchases late at night at the "mall that never closes." Jupiter Research reports that online shoppers often return offline to the same vendor or manufacturer, with the typical shopper spending six dollars offline from the same seller or on the same brand for each dollar spent online.

The Dieringer Research Group reported in August of 2004 that online purchases had grown to equal the combined purchases through direct mail advertising, catalogs, and telephone solicitation. Perhaps the most comprehensive surveys and statistics are from the United States Census Bureau which has tracked the growth of online shopping for several years. The following table tracks the growth of sales in the United States from 2000 through 2004.

Table 1-Retail Sales (In Billions)
Table 1 ... Retail Sales (In Billions)

The figures for the first quarter of 2005 were released by the Census Bureau on May 20 and are preliminary figures. One interesting note is the difficulty in estimating the future growth of online sales. In 1998, eMarketer predicted online sales would reach 35 billion in 2002. The Census Bureau figures show over 44 billion in online sales for that year. eMarketer's prediction was thus in error by more than 25%. The exact methodology used in arriving at the prediction is not known, but presumably the then current rates of increase, increases in internet usage, and similar objective criteria played into the calculations. The low estimate is perhaps the result of being unable to accurately predict the subjective habits and learning curves of purchasers and the explosion of businesses selling online. Predictions of future growth almost certainly face the same challenges and are likely to result in similar errors. The only safe thing that can be said is that online sales will continue to grow, both in terms of actual dollar amounts and as a percentage of total retail sales.