Per Capita Online Spending Drops

The rate of growth of online spending per person is declining even though
total online retail spending is increasing, according to a study by The Wharton School of Business.

The study also found there is a significant dropout rate among online
shoppers and 15 percent of online buyers from 1997 did not buy online in

The results are part of the Wharton Virtual Test Market, which tracks more
than 23,000 panelists, including 791 participants who have been on the
panel for each of its three years in existence.

“No matter how well electronic retailers have done this holiday season,
there are some fundamental factors that appear to be eroding the growth of
spending and growth of the market,” said Jerry Lohse, research director of
the Wharton Forum on Electronic Commerce, which sponsors the Wharton
Virtual Test Market.

“Only 50 percent of the dropouts from 1998 returned to
make a purchase in 1999. Further, new buyers are not arriving as quickly to
take their place. The implication is that online shopping is just another
way of shopping.”

According to the Wharton research, many forecasts for e-commerce spending
and market growth assume linear increases in per person online spending.
Based on the latest Virtual Test Market survey, current levels of consumer
online spending are at approximately $29.2 billion, and Wharton the
research projects that Internet retail sales will climb to $133 billion by
January 2004.

Concerns about privacy and trust were among the most important factors that
distinguished buyers from non-buyers online, the study found.

“People are primarily dropping out for privacy or security issues, or
because they’ve had a bad shopping experience online and want to deal with
a real person,” Lohse said. According to the study, concern about
“monitoring by third parties” was the highest predictor for not purchasing
online and an unwillingness to “trust the business with private data” was
also significant.

Research done by Jupiter Communications and released during the summer of
1999 found that 64 percent of online consumers are unlikely to trust a Web
site, even if the site prominently features a privacy policy. The report
also found that the attention focused on Internet privacy issues by the
government and media are serving as fuel for consumer fears, and will
affect both online advertising and digital commerce revenue unless sites
take action and educate and communicate with online consumers.

If it’s privacy and security concerns that are keeping shoppers away from
online stores, the Wharton study came to the same conclusion as most every
other study when it came to why people buy online — convenience. For
example, the Wharton research found one predictor of whether someone will
buy music online is travel time to the nearest music store.

A lack of time,
a “wired” lifestyle, and not demographics are important indicators of
whether someone will shop online, the study found. In addition, increased
experience with the Internet, higher numbers of hours online at home, use
of the Web for financial services, and a significant reliance on e-mail all
increased the likelihood of spending online.

News Around the Web