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+++ S P E C I A L R E P O R T +++
"Holiday Readiness 2001:
Helping Retailers Prepare for the Holiday Season"
Vividence Research Report
 November 6, 2001

Table of Contents

Introduction
Methodology
Part 1: Recommendations for Holiday Success
Part 2: Trends for this year’s holiday shopping compared with last year
Part 3: How the tragic events of September 11th have affected holiday shopping plans
Part 4: Conclusions

INTRODUCTION

To help companies better prepare their Web sites for holiday shopping, Vividence performs studies of consumer expectations and online shopping behavior. This report covers the key insights from these studies and lists Vividence recommendations for improving Web sites to better meet customer needs.

METHODOLOGY

Empirical evidence presented in this paper is based on Vividence Web site evaluations conducted using Vividence’s eXperience Management System (XMSä), a technology platform for assessing online customer experience. The Vividence methodology involves sending large samples of Vividence panelists (typically 200-800) to live Web sites. The Vividence browser technology records the behavior of each panelist as he or she interacts with the Web site and assesses panelist perceptions and reactions through qualitative comments and follow-up questions.

Vividence conducted four large studies evaluating customer experiences and expectations. Longitudinal analyses were performed on the three pre-Holiday studies, conducted last year (2000) and both before and after the tragic events of September 11th this year (2001). Panelists were recruited from the 150,000-person Vividence Research Panel, representing a cross-section of Web-savvy online consumers.

Longitudinal holiday readiness studies
These studies asked people about their online holiday shopping habits, expectations and attitudes and had users attempt specific online shopping tasks at their preferred sites.

Study 1: October 2000, sample size =450
Study 2: September 1, 2001, sample size =500
Study 3: September 17, 2001, sample size =400

Shopping cart abandonment study
This study, conducted in August 2001 with 200 panelists, evaluated the use of different kinds of online shopping carts to determine customer preferences.

PART 1: RECOMMENDATIONS FOR HOLIDAY SUCCESS

Vividence’s Holiday Readiness studies asked participants what factors most influence their online purchasing. Shipping fees and product prices topped the list. The most common influences on whether a consumer makes a purchase online were as follows (with percentage of participants indicating each item in parentheses).

Top 10 Holiday Purchase Influencers

1. Shipping fees (92%)
2. Prices (92%)
3. Product availability (86%)
4. Special promotions or incentives (76%)
5. Selection (69%)
6. Order tracking (66%)
7. Clearly identified delivery time (65%)
8. Return policy (63%)
9. Ease of use (62%)
10. Site performance/speed (51%)

Industry studies estimate that anywhere from 25 to 75 percent of Web consumers abandon their shopping carts before making purchases online. The top reasons for shopping cart abandonment, cited by those who had problems were as follows (with percentage of participants in parentheses).

Top Reasons for Shopping Cart Abandonment

1. High shipping prices (72%)
2. Comparison shopping or browsing (61%)
3. Changed mind (56%)
4. Saving items for later purchase (51%)
5. Total cost of items is too high (43%)
6. Checkout process is too long (41%)
7. Checkout requires too much personal information (35%)
8. Site requires registration before purchase (34%)
9. Site is unstable or unreliable (31%)
10. Checkout process is confusing (27%)

Even when the shopping cart provides good customer experience, there are other reasons people abandon shopping carts without purchasing. Vividence found that customers often use shopping carts to gather additional information relevant to their purchase decision or to store items for future purchase (with percentage of participants in parentheses).

What else do customers use their cart for?

87% - To determine shipping charges
57% - Store items for future purchase
27% - To determine shipping/delivery times

Although people abandon shopping carts, people also report a variety of benefits for saving items in their shopping cart (with percentage of participants in parentheses).

Top reasons customers save items in their cart:

1. To remember items for future purchase ­ Wish List (45%)
2. Combine items to lower shipping costs (17%)
3. Interrupted while shopping (10%)
4. Waiting to get money (10%)
5. Waiting for coupon or gift certificate (9%)

Retailers should concentrate on these key influencers in order to drive customers to purchase. Based on these drivers as well as other problems uncovered in Vividence studies, Vividence recommends the following guidelines in preparation for the Holiday season (with percentages of participants in parentheses).

Top 10 Rules for Holiday Success

1. Save customer shopping carts for later visits.
Customers do return later to purchase items “abandoned” in their cart. Make it easy for them by keeping their cart items for 30 days or more.
2. Offer a promotion or incentive to purchase.
Promotions or deals act as a differentiator between sites. Offering free shipping will address the most common purchase influencer.
3. Show shipping prices early.
Customers prefer choosing shipping options and seeing shipping prices in the shopping cart (82%).
4. Make site registration optional.
Customers are more likely to abandon their cart if registration is required (52%).
5. Consider a charitable donation tie-in.
Customers are increasingly interested in donating to charity (69%). Sites that contribute in some way will engender customer good will.
6. Keep products in stock.
Out of stock products are frustrating to customers, especially when notification is delayed until the user places the item into their shopping cart.
7. Provide order tracking.
Customers want to reduce uncertainty about delivery time by tracking their orders. This will also reduce calls to customer service.
8. Shorten the checkout process.
Customers prefer entry fields on one screen vs. multiple screens (60%).
9. Be clear about delivery time.
Customers want to know when their items will arrive.
10. Provide paper gift certificates.
Gift certificates can influence purchase (34%) and customers tend to prefer paper to email gift certificates (36%).

Ensuring these recommendations ultimately meet customers’ needs depends on whether they are implemented in an easy-to-use design. Design flaws can be subtle and many times can only be uncovered by testing the site with actual users. For example, delivery times for products may be posted in what seems like a logical place on the site. However, if the typical user does not notice this information, then all benefits of the feature are lost. All design changes should be tested with users to make sure no further problems are uncovered.

Screenshots of best practice designs for retail Web sites
Please see Appendix: A for screenshots of examples of good Web designs for shopping cart, shipping prices, checkout, and registration.


PART 2: TRENDS FOR THIS YEAR’S HOLIDAY SHOPPING COMPARED WITH LAST YEAR

Why customers shop online

Likelihood to purchase online remains high for 2001, with 91% of participants reporting they will do at least some of their holiday shopping online. Convenience continues to be the top reason cited.

How customers find shopping sites

Compared with last year, customers are more self-directed in finding shopping sites. They are relying less on banner ads, online message boards/newsgroups, email promotions, and recommendations from others, and more on search engines and sites related to known offline brands.


In addition, consumers may be getting more comfortable with shopping online (with increased percentage of participants in parentheses):

· Customers report that they are going to click & mortar sites directly (up 17%), rather than being directed through email promotions or banner ads.
· They are also using search engines more (up 10%).
· It’s easier to send gifts to others (up 10%) and more are doing it (up 13%)
· They are finding what they need more quickly (20% average decrease in time to complete shopping tasks, despite viewing the same number of pages)


PART 3: HOW THE TRAGIC EVENTS OF SEPTEMBER 11TH HAVE AFFECTED HOLIDAY SHOPPING PLANS

Because of the tragic events of September 11th, Vividence re-ran the 2001 Holiday Readiness study to see what, if any, impact the events had on consumers’ shopping attitudes and behavior. The events did not change the top influencers and recommendations, nor the general trends found between last year and this year. However, when participants were asked directly how they felt the events would change their behavior, they reported that they plan to spend less overall this year, due to concerns about the economy, but that they plan to shop online more.

Plans for this holiday season after tragic events of September 11th, 2001 (with percentage of participants in parentheses):

· There is more concern about the economy (71%)
· They plan to shop in stores less (37%), only 4% plan to shop in stores more
· They plan to spend less overall (34%), only 10% plan to spend more

The economy is the main reason why customers plan on spending less this season, which held constant before and after the tragic events of September 11th.

In the aftermath of September 11th, people felt the tragedy would change their behavior. They reported that they would (with percentage of participants in parentheses):

· Donate to charity more (69%)
· Spend more time with family and friends (52%), only 3% plan to spend less time
· Travel less than before (49%), only 1% plans to travel more
· Shop online more (37%), only 8% plan to shop online less

When asked why they would shop online more, the most common reason cited was concern about safety in stores.
Understandably, concerns this Holiday Season are dominated by the economy and world events. Safety is the number one concern, and as mentioned earlier, the number one reason given for why people will shop more online.


PART 4: CONCLUSIONS

Challenges

Consumers are clearly worried about the economy and are likely to be conservative with their gift-buying budgets this year compared to last year. Prices, promotions, free shipping and other financial incentives will likely be strong drivers.

Consumers are more likely to shop at sites of well-known offline brands. When a consumer goes to a well-established brick-and-mortar branded site, expectations are high for a positive customer experience, including customer support, ease of use, stock availability, secure shopping, helpful shopping features, site performance, and conformity to Web conventions. Many customer experience issues, especially ease of use issues, can be fixed by focusing on improving the customer experience. There is little excuse for not getting Web design basics right. Vividence’s Top Ten recommendations represent quick wins to address top customer complaints about online shopping.

Shopping cart abandonment rates remain high, and retail businesses need to ensure that their Web designs encourage follow-through. Our data reveal, however, that shopping cart abandonment—as measured in Web logs—is not necessarily always bad. A large portion of this abandonment simply reflects how customers comparison-shop and shop over time. For example, people leave items in their cart until they can come back with a coupon or offer, or until they can afford the item. These are behaviors that sites cannot easily change, but the more they understand and facilitate them, the more they will encourage customers to return at a later date to complete that purchase.

Opportunities

This holiday season, people are more familiar with the Web and can draw on their shopping experiences from last year. This increased experience will allow customers to form appropriate expectations for the conveniences that online shopping offers. Taking advantage of features, such as gift lists, gift advisors, and price comparison tools may be less daunting to consumers this year. The holiday season represents an opportunity to capture more holiday dollars online but also to hook more customers on the advantages of online shopping throughout the year.

The fallout from the tragic events of September 11th may provide an unexpected opportunity for companies to showcase the advantages of online shopping. People report that they will spend less overall this season but will shop online more due to fears about the safety of being in crowded stores and malls. People also anticipate traveling less this holiday season, which makes the ease of shipping gifts online an attractive alternative for gift buyers.

Submitted by:
Molly Holtman
Phase Two Strategies
111 Pine Street, 8th Floor
San Francisco, CA 94111
Phone (415) 772-8448
Fax (415) 989-8186

About Vividence Corporation
Vividence is the leading provider of Customer Experience Management products and services to the customer-driven enterprise. By capturing the behavior, thoughts and attitudes of customers on the Web, the Vividence XMS Suite™ yields business insights that improve profitability. More than 200 customers, including Best Buy, Cisco Systems, Citibank, Compaq, Dell, eBay, Microsoft, Pfizer, SAP, Wells Fargo and more than 100 of the Fortune 1000 use Vividence. For more information, please visit www.vividence.com.
 

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