Online Impulse Buys Depend On Speed of Delivery
By Bernice Hurst, Contributing Editor, RetailWire
The best ways and means of
encouraging impulse purchases provide endless hours of discussion for retailers.
According to Knowledge@Wharton the subject is just as fascinating (and challenging)
for online retailers as those operating from bricks and mortar premises.
Considering
shoppers’ different patterns raises some intriguing issues.
Katherine Milkman, author of I’ll Have the Ice Cream Soon and the Vegetables
Later: A Study of Online Grocery Purchases and Order Lead Time, selected
online grocery shopping because "customers must typically schedule the
delivery of food items for a more specific time."
While acknowledging that
instant gratification isn’t an option, the study
demonstrates that sooner vs. later is influential. Ms. Milkman, an operations
and information management professor at Wharton, along with Todd Rogers of
the Analyst Institute and Max H. Bazerman of Harvard Business School, used
data "partially
inspired by the rise of internet shopping because that trend has created a
pool of data that is both extensive and much more exact than information that
could be obtained through surveys or other research methods." Conclusions
were based on "North American urban online grocery operation over the
course of the 2005 calendar year."
Essentially, the idea was "to
study online shopping patterns to see if consumers were indeed more likely
to order ‘want’ foods like
high-calorie desserts and snacks for more immediate delivery while tending
to order ‘should’ foods
like fruits and vegetables several days in advance."
It turns out that, "in
general, orders for ‘want’ foods are
greater when delivery time is shorter" — or closer to that need
for instant gratification. In addition, for the most part, longer
delays between ordering and delivery meant lower spend. "Spending decreases
as we order food further in the future," she said. "But the more
immediate the gratification, the more freely we spend."
As the report
suggests, "retailers might try to push their customers
to place more orders for the immediate future" as "more money will
be spent under those conditions." Which is similar to what bricks and
mortar retailers have long recognized when placing temptation near the checkout
to increase spend.
Discussion Questions: How likely are consumers to make impulse purchases
online? What are some ways websites can increase impulse purchases?
I’m a bit bothered by both the use of 2005 data and the use of the food category for informing this question. Online shopping has evolved so much since 2005 in terms of its ease, the flexibility of sites, the enhanced cross merchandising and the rise of online reviews and other social content that it seems tricky to try to draw conclusions off of five year old data. Further the use of food in urban settings seems suspect to me–maybe people order online more when they’ve having a dinner party or another special event that would lead them to order fattening desserts or large quantities of food.
Given all that, I still think there’s something to the “instant gratification.” When I was at Forrester, our data continually showed that “I want it now,” “I want to see the item” and “I don’t want to pay shipping” were perennial reasons why someone would shop in-store instead.
Etailers should definitely spend more time thinking about cross merchandising (suggesting accessories and full outfits instead of apparel items, for example) and be willing to expedite shipping at reasonable prices for good customers (vs. making it the biggest profit center in the mix). These will help but really critical are the kind of rich internet applications that make seeing alternative items on a site easy and seamless. Anyone who’s ever clicked out of a shopping cart only to land back at the home page and have to navigate all the way back to the favored category can tell you even when you want to impulse shop online, it’s not easy.
I have to agree with Lisa that Food is a tough category for this one. Certainly the FMCG market is where we typically study ‘impulse’ purchasing–so it makes sense from that standpoint. But the correlation between immediate need (or want) satisfaction and delivery time seems almost a given.
We once had Kozmo.com as a client. If you missed their brief moment of fame, their business proposition was to deliver any size order within an hour in NYC. The number of orders they got for a Snickers Bar and a Coke was what put them out of business.
The impact of impulse merchandising in other categories online is a different subject all together. How many times have you been at the checkout screen on one of your favorite sites (my weakness is outdoor retailers) and added one of those “you might also like…” items to your order at the last minute? Something you weren’t looking for, don’t really need and probably won’t ever use–but right then it looked like too good a bargain to pass up. (BTW, anybody want to buy 100 perfectly good Swedish Army tent pegs in unused condition?)
We shouldn’t be too surprised that shorter term, which is closer to instant gratification, is met with higher spending levels and more indulgent choices. This is human nature.
According to a recent NYT article, people think that they’ll have more leisure time in the future too. So, they believe they are more likely to live out some “ideal” in the future (eating vegetables, spending less, having more time) and gratify themselves in the short run (ice cream, higher price points). For this reason, the old data doesn’t really bother me much. I think we’d see similar results 5 years from now too.
The challenge that online grocers face is that their most convenient attribute is counter to the idea of impulse purchasing.
When one goes to their online grocer’s site, after a page or so of generic specials and features, they go to their personal page. That personal page essentially has a personal shopping list. That is a list of products they have bought in the past. There is nothing easier than going down that list and clicking on these items. It is better than a shopping list because it forgets nothing. However, it doesn’t lead the shopper to new, interesting or impulse products. That is a separate activity.
Many non-grocery sites have not only solved this problem, but turned it into a very effective way to increase sales. The leader of course is Amazon. If you look at one product, they suggest that you might also like another. Or, they tell you what others who bought the product of your interest also bought. Or, they send you an email with a suggestion.
While not quite as sophisticated as Amazon, FreshDirect has adopted some of these features. The further refinement of these Amazon-like features will surely add up to significant additions to the shopping list and impulse sales.
Instant gratification, especially for “want” items is nothing new. And while the other panelists are absolutely right about Food being a less relevant category for a broader discussion of retail, there are some reasons that are just as applicable to other categories and vice-versa.
The big challenges for customers and retailers, in addition to the age-old issue of having the right merchandise on hand–is time and trust. Customers are and will be time-starved and retailers that can satisfy a need OR A WANT within the time constants imposed by customers will be the winners.
Hence the brilliance of Amazon Prime and Zappos’ commitment to keeping customers happy even if it means taking returns unconditionally. Especially for WANTS, time and trust can more than offset price, for customers that are ultimately more profitable and loyal.
I agree with Ben. I believe that there can be two issues at work here. The first is once you have spent some money spending a little more is less an issue. We are working with a software company whose business model is to determine in real time what additional items a consumer might purchase based on their current order.
The second ties in with instant gratification “I want it and I want it now!” In this case, the time lag is longer than what most might infer as instant gratification but I believe the concept still holds.
I believe I will be different from most respondents and the poll. I am an impulse buyer online, especially amazon.com and book purchases. In a retail store other than Barnes & Noble, I can walk away from impulse purchases. Help me out, why can’t I do it online?