It's Not Just Price That Drives People Online, Study Finds

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A new study says that consumers' ability to find obscure items on the Internet is what leads them to shop online, rather than price alone.


"People do save money by going online. But when we compared lower prices to greater choice, we found that the value to consumers of having the extra choice was 10 times greater than the value from price alone,' said MIT Sloan School of Management professor Erik Brynjolfsson. "Consumers tend to be less price sensitive if they are able to find a special, niche product."


This translates into increased sales of rare or unusual items that consumers would not normally find offline. In one old example, the study found that obscure book titles made up 40 percent of Amazon.com's book sales in 2000.


Ellen Siminoff, president/CEO of search marketing firm Efficient Frontier, Mountain View, CA, agreed that online shoppers are not just looking for the best deal.


"You can find things that previously had been really, really hard to find. Search can be very effective in that regard," she said.


And online merchants don't want price to be their only value proposition, Siminoff said, because that results in lower margins.


"The uniqueness of gifts ... different than what someone can find in their local store is a big [online] differentiator," she said.


But data on online shopping and search behavior from other sources tell a different story. For example, recent data from Forrester Research, Cambridge, MA, shows that 72 percent of people who abandon shopping carts on retailer's Web sites said they didn't buy the item because they had expected to find lower prices online than in the brick-and-mortar store.


"A lot of the data we have is that price is a huge driver of why consumers shop online. And a lot are convenience shoppers -- it is easier than schlepping to the local mall," said Forrester senior analyst Sucharita Mulpuru.


A smaller portion of consumers are shopping online for hard-to-find items, Mulpuru said. And the majority of searches, particularly during this holiday shopping season, still are focused on major brands and products.


Internet monitoring service Hitwise Inc., Chicago, reported that eBay, Wal-Mart, Best Buy, Target and Circuit City were the top five search terms leading to shopping sites for the week of Dec. 3-10. Popular products this season, such as iPod and XBox, are among the top terms searched.


Meanwhile, Brynjolfsson said consumer's ability to find obscure items has reversed the traditional retail sales model. He pointed to the traditional 80/20 rule.


"The Internet seems to have significantly changed this balance," he said, "and we think this trend will get more and more important over time."


Fredrick Marckini, president of search marketing firm iProspect, Watertown, MA, agreed.


"The power of filters and recommendations engines draws people into the back catalogs [of retailer's Web sites]," he said.


Christine Blank covers online marketing and advertising, including e-mail marketing and paid search, for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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