For the younger generation, as well as many older people, online buying has become a norm, but it has drawbacks as well as advantages, according to www.antwerpfacetsonline.be.
Is the age of the bricks-and-mortar store coming to an end? Will consumers do all their shopping from their computers or even their cellular phone? No more driving to shopping malls with time wasted in traffic jams. No need to trudge around for hours on end inspecting and trying on goods at one store after another. Get online, compare products and prices, type in your credit card details with complete confidence, and get on with your life while waiting for the items you have bought to be delivered.
Although that is probably the type of rosy picture that Internet retailers would like to present, it is not an accurate representation of what is happening in the sphere of online shopping. At least, not yet, although it may well come to pass in the not so distant future. The Internet has become an integral part of daily life in little more than around 10 years. Even five years ago, many people were deterred from buying goods online through fear that encryption levels were not high enough to prevent crooked hackers from accessing their credit card details.
Although many shoppers still refuse to purchase goods online today because of security concerns, those numbers have dropped substantially. Another issue, and one of particular relevance to the diamond and jewellery industries, was that buyers would be unwilling to buy online since they would want to hold the item and inspect it with their own eyes. That has also largely dissipated, as the rise in Internet sales appears to show.
Indeed, at least six percent of all jewellery, mostly diamond jewellery, is estimated to be sold online in the United States today. Although that might not seem to be a high proportion it is larger than the 4 percent share seen for retail categories as a whole.
What about paying thousands of euro or dollars for an item and then being unhappy with it when it arrives? Online companies moved quickly to allay those fears, too, by promising to take back the goods and return the cash within a certain timeframe. And often with free delivery, too.
And at times of economic problems, with consumers looking for the best possible value, Internet sales have received a further boost. That is likely to be even more the case in light of the move to what is being described as the 'new normal' where job insecurity and the shock caused by the near financial meltdown of late 2008 is reportedly leading people to spend less and save more. Online sales can be expected to rise as consumers seek lower prices.
The global financial crisis has reduced the number of traditional stores. In the United States, for example, there are an estimated 22,000 jewellery stores compared with 23,000 in 2008. As a result, there will be fewer stores to service the projected 4-5 percent annual growth in sales over the next decade. That, also, might provide a boost to online sales.
The first secure Internet shopping sale took place in August 1994 with the sale of a CD in the United States. Even by the year 2000 with the dotcom revolution at its height, online sales were only around $1.2 billion annually. But e-commerce sales have taken off over the past six years or so, growing by 3,500 percent, as fears over the future of the Internet following the bursting of the dotcom bubble, and initial consumer concerns about the safety of shopping by credit card online, have fallen.
The rise in online sales has coincided with the huge expansion in broadband use globally, since it enables customers to access the Internet much more quickly and to download information almost effortlessly. But it has also transformed the way people do their shopping and, critically, the way traditional retailers sell their goods. Indeed, it can be compared with the revolution in shopping that took place two or three generations ago, and which has long been forgotten, where self-service replaced over-the-counter style shopping.
A huge proportion of young people buy goods online as a matter of course. But it goes much deeper than that. For many youngsters, the now-traditional way of buying goods at a store has become almost irrelevant. For them, Internet shopping is the new norm and that is creating challenges for retailers. They need to expand their traditional stores to accommodate more goods, but they also need to operate online sites.
James Roper, the chief executive of British firm IMRG, a research group for global e-retailers, says that traditional retailers have been forced to concentrate on the mass market as they only have the shelf space and time for high-selling products. The Internet, however, presents consumers with unlimited choice. "It is a bigger marketplace and consumers can find precisely the product they want rather than just what is available in the shops," he said. "You can get products from anywhere in the world. The traditional retail model is not geared up for that."
Although there is plenty of hype about the online revolution, industry analysts point out that most shoppers enjoy the experience of going out shopping, and that Internet sales remain a relatively small proportion of overall retail sales. Nick Bubb, retail analyst at Pali International, said: "A lot of people still want to look at things before they buy. They will do the research online and then go and shop outside." It is unlikely that there will be a mass shift to online sales. Consumers enjoy browsing and impulse buying."
Products such as DVDs, CDs and books, are made for online selling since they require little consideration on the part of the buyer apart from price and delivery costs. The shopper knows precisely what he is purchasing so it is simply a case of finding the cheapest online retailer. However, with a more personal or sentimental item, such as a dress or piece of jewellery to match, consumers are more likely to prefer to see the item for themselves.
They enjoy the whole experience: the pleasure of trying products on, or simply browsing and planning a future purchase. Although that is offset to some extent by the fact that men in particular appear to prefer the anonymity of online shopping rather than the hustle and bustle of shopping in a mall, most jewellery items are nonetheless still bought in a regular store.
The weather also plays a part in the online versus traditional store buying issue. In the pre-online shopping era, severe weather conditions meant people either cancelled shopping plans or delayed them to a later date. Now, however, shopping can be done online, thus by-passing inclement weather. An example of that was seen in the United States before Christmas when extreme weather conditions in the north-east of the country aided online sales to post a year-over-year growth rate of six percent, a one-week sales record with more than $4.8 billion in spending, according to marketing research company comScore Inc.
The growth in Internet sales in general is seen in fourth-quarter sales reported by Amazon.com which reported a 42 percent rise to $9.52 billion, while net profits jumped 71 percent to $384 million. For fiscal 2009, net sales rose 28 percent to $24.51 billion. While Amazon's sales in North America rose 36 percent in the fourth quarter to $4.96 billion, international sales, in the U.K., Germany, Japan, France and China, increased even more – by 48 percent to $4.56 billion. Amazon.com forecasts a first-quarter rise in sales of between 32 and 43 percent.
Similarly, leading online retailer of loose diamonds and jewellery, Blue Nile, reported rises in third-quarter sales. While U.S. sales rose only slightly, the company said international sales jumped 27.5 percent to $8.8 million. The company reports its fourth-quarter and full year figures for 2009 later this month.
Meanwhile, in Europe, there appears to be a clear line between online sales in Britain and those in the rest of Europe. Shoppers in the United Kingdom spent more online than any other consumers in Europe last year, according to a study by the Centre for Retail Research (CRR) on behalf of price comparison service Kelkoo. It showed that Britons bought goods worth £38 billion ($60.6 billion) on the Internet in 2009.
That figure is forecast to grow by 12.4 per cent to £42.7 billion ($68.1 billion) this year. And statistics show that consumers are growing more confident about purchasing on the Web: the number of people who spent more than £1,000 ($1,600) on a single Internet purchase climbed to 25 percent in 2009 from 12 per cent in 2008.
In total, online purchases accounted for 9.5 per cent of all British retail sales in 2009. Internet sales across Europe as a whole are predicted to rise by 20 percent in 2010 to £153 billion ($244 billion). That compares with CRR's forecast for total retail sales growth in Europe of just 1.4 percent as the region struggles to emerge from recession.
Growth of 20 percent would outstrip the CRR's forecast for a 10 percent increase in online retail sales in the United States this year. However, it would leave online sales in Europe, as a proportion of total retail spending, at just 5.5 percent, below the United States on more than 7 percent.
In the United States, consumers Americans spent $29 billion shopping online in November and December, a gain of four percent, according to market research firm comScore. "The 2009 online holiday shopping season was a positive one as its growth rate slightly surpassed our forecast and returned to solidly positive rates after nearly a full year of marginally negative growth," said comScore chairman Gian Fulgoni.
"Among the highlights of the season was the first $900 million online spending day and a strong late season spending surge, propelled by effective retailer promotions, guaranteed shipping and a major snowstorm on the eastern seaboard that convinced many to shop from the comfort of home," Fulgoni said.
The single largest spending day was December 15 - one of the last days to order for guaranteed Christmas deliveries -when online sales totaled $913 million. The next best day was "cyber Monday," at the start of the holiday shopping season, with sales of $887 million for November 30. Online spending during the December 19-20 weekend of the snowstorm rose to $767 million from $677 million a year earlier.
The top growth category for online sales was jewellery and watches, up 20 percent following a disastrous 2008 holiday season in which sales plummeted 29 percent, comScore said. Consumer electronics ranked second with 15 percent sales growth, bolstered by strong sales of flat-panel TVs.
