[ISN] Do Web Shoppers Worry More About Price than Security?

From: mea culpa (jerichot_private)
Date: Fri Oct 23 1998 - 15:27:17 PDT

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    The first time Tom Bruno bought something online was six months ago,
    shortly after his apartment was broken into and more than 300 of his CDs
    stolen. "I had some old, obscure stuff I couldn't just go pick up at Tower
    or Sam Goody," Bruno says. "Plus it's expensive to replace hundreds of CDs
    at once, so I thought I'd check out the prices and selection on the
    So far, the 28-year-old Web designer from West Hollywood (Calif.) has
    replaced about half of his stolen collection -- and he hasn't had to leave
    home to do it. Rather than drive all over Los Angeles looking through used
    CD bins or pay $20 per disk at chain music superstores, Bruno now prefers
    to surf the cyberaisles of CDnow.com. "I'd never bought anything [online]
    before because I was a little nervous about giving out my credit card
    number. But the prices were so much cheaper and the selection so much
    better that I got over it pretty quickly," Bruno says. "I figured it
    wasn't any worse than giving my [credit card] number over the phone to buy
    movie tickets." 
    Like Bruno, more and more online shoppers are worrying less about the
    security of billing information they submit via the Net and more about the
    price of what they're buying. In other words, they're starting to act a
    lot like normal shoppers. The positive news for online retailers is that
    the hordes of shoppers they expect to see one day will probably show up. 
    Estimates are that online shoppers may spend as much as $37.5 billion a
    year by as early as 2002. The downside may be that these shoppers will
    expect retailers to compete on price, which could undercut the power of
    Web merchants to charge more than stores do in return for providing
    convenient shopping online. 
    That's the view of the future that emerges from a new, joint study by
    Internet market research companies Jupiter Communications and NFO
    Interactive. The study, which combines a quarterly survey of 50,000 online
    and offline households nationwide with follow-up surveys of 3,000 online
    households and 2,500 individual customers, shows that 77% of "browsers" 
    (defined as those who visit commerce sites but have never purchased
    anything) rank lower prices as the No. 1 incentive that would get them to
    buy online. Tight security of billing and credit card information comes in
    No. 2 on the list of concerns, with 65% of respondents saying it's a key
    factor for them. 
    "Security is no longer the online user's only concern," says Jupiter
    analyst Evan Cohen. "Demand for price discounts is also paramount.
    Aggressive pricing, such as discounting high-volume items, helps get
    people over the first hurdle of just coming in the door. I wouldn't advise
    online retailers to slash prices across the board, but strategic
    discounting can definitely help convert the non-buyer." 
    Julie Wainwright, president and CEO of online video retailer Reel.com in
    Emeryville, Calif., agrees. Last August, as Titanic fans waited in line
    outside stores to buy the home video of the blockbuster movie for $29.95
    or $19.95, Reel.com was selling it for $9.95. The strategy behind such an
    offer, traditionally known as a "loss leader," was to attract customers
    who would buy other items during the same visit and also become return
    shoppers.  "People needed a compelling reason to try our site," Wainwright
    says. "And what we found was that aggressive pricing gave them a big
    enough incentive to change their shopping patterns." As a result of the
    Titanic offer, Wainwright says, 260,000 new customers showed up, nearly
    tripling her client base -- and 15% bought videos in addition to Titanic.
    By the end of September, 25% of her new clientele had become repeat
    If Web shoppers are taking security more for granted, part of the reason
    is habit. "The highly publicized successes of online stores such as
    bookseller Amazon.com and Cdnow.com, as well as the overall growth in the
    online shopping market, have provided a benchmark level of comfort for
    non-buyers that increases with time spent online," Cohen says. 
    "Whenever a new technology emerges, most people act on their hypothetical
    fears," adds Bernadette Tracy, president of the New York-based Internet
    consumer marketing firm NetSmart-Research. "We saw this with ATM cards 12
    years ago, and now we're seeing it with the Internet. People will try
    online shopping out first with a small purchase, usually less than $20,
    and if there are no bad repercussions, they become comfortable buying more
    expensive items more frequently." 
    Even so, Tracy argues, security remains a big issue for people until they
    find that comfort zone. "It's true that security concerns are evaporating,
    but they still remain the main deterrent among non-buyers," she says. 
    Tracy's recent study of 1,000 household Net users nationwide shows that
    about 50% of non-buyers cite security concerns as their main reason for
    not making purchases. Only 10% cited high prices as a deterrent -- even
    less than the share who cited as a drawback the inability to see the
    product, or difficulty with ordering. 
    Still, Tracy has noted a trend that seems to square with the Jupiter
    results. "Security is still an obstacle especially for those I call late
    adopters and newbies," she says. "But I've discovered that these concerns
    dissipate the more convenient and compelling the merchandise. I don't see
    saving money as a key motivation because we're living in a time-starved
    society where time is almost as -- if not more -- important than money." 
    Perhaps the answer is that the keys to successful Web retailing will be
    convenience --plus pricing. "Convenience and selection play a role in
    attracting customers, but I think the first reason new shoppers go online
    is to compare prices and find the lowest one they can," says Reel.com's
    Wainwright. "As far as getting new people to buy online, price is a major
    factor. But as far as getting them to keep coming back, quality and
    service can't be ignored." 
    Back in West Hollywood, Bruno is busily proving the theory that successful
    Web retailing requires a combination of all three. He figures that if he
    lives on jujubees and macaroni and cheese, he can probably replace the
    rest of his stolen CD collection within a year. He also considers himself
    a more savvy shopper both online and offline than he was six months ago.
    "I usually spend more [at CDnow.com] than I intend to, and I usually buy
    something that's not on my list," he says. "But I get to listen to
    practically the whole album if I want and I think I'm getting as good a
    price -- if not better -- than anywhere I used to go." 
    By Stefani Eads
    Staff Reporter
    Business Week Online
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