February 13, 2008

Online Shopping

American internet users have embraced online shopping because they say it is convenient and a time-saver.

Two-thirds (66%) of online Americans say they have purchased a product online, such as a book, toy, music, or clothing. Attitudes and perceptions play a key role in whether online users choose to purchase products online.

  • 78% of internet users either agree (53%) or agree strongly (25%) with the proposition that shopping online is convenient for them.
  • 68% of internet users either agree (47%) or agree strongly (21%) with the notion that online shopping saves them time.

At the same time, most online Americans have high levels of concern about sending personal or credit card information over the internet.

While the number of e-shoppers continues to grow, there is still widespread concern in the internet population about the safety of financial and personal data online.

  • 75% of internet users either agree (39%) or strongly agree (36%) with the proposition that they do not like giving out their credit card number or personal information online.

More than half of internet users encounter frustrations and other frictions in the course of online shopping.

  • 43% of internet users have been frustrated by the lack of information they encounter while using the internet to find out about or buy goods or services.
  • 32% have been confused by information they have found online during their shopping or research.
  • 30% have felt overwhelmed by the amount of information they have found online while doing online shopping or research.

This comes to 58% of internet users who have experienced at least one of these three feelings during online shopping.

More people would shop online if they trusted the e-commerce environment more.

Internet users’ attitudes about online shopping are not entirely consistent. They are willing to shop online because it is convenient and a time-saver, but they also do not like sending personal or credit card information over the internet. Our analysis suggests that if concerns about the safety of the online shopping environment were eased and if shoppers felt that online shopping saved them time and was convenient, the number of online shoppers would be higher.

It is possible to sort through these different attitudes to see what matter more in influencing people’s propensities to shop online.1 Using as the baseline internet users’ response to the question about whether they have ever bought a product such as a book, music, toy or clothing online, the analysis asks what would happen to levels of online shopping if certain attitudes were different. We find that concerns about sending personal or credit card information online loom largest in influencing whether to shop online. Specifically:

  • If the three-quarters of internet users who agree that they don’t like sending personal or credit card information online felt more confident about doing this, the share of the internet population shopping online would be 7 percentage points higher than the current average of 66%, or 73%.
  • If those who disagree that online shopping is convenient felt otherwise, the share of the internet population shopping online would be 3 percentage points higher than the current average (or 69% instead of 66%)
  • If those who disagree that online shopping saves time believed that they could save time by e-shopping, the share of the online population shopping online would be 2 percentage points higher than the current average (or 68% instead of 66%).

The estimates above are independent effects, showing the impact when the other factors noted above, as well as other demographic and socio-economic impacts are held constant. In fact, demographic factors such as race or gender have no significant impact on predicting levels of online shopping, and the impact of income is small; if low-income Americans suddenly had at least average incomes the incidence of online shopping would be one percentage point higher.

Finally, higher broadband deployment would also drive up the size of the e-shopper cohort by 6 percentage points.  

Low–income online Americans are more likely to see the risks of online shopping than herald the time-saving or convenience benefits of using the internet to shop.

Internet users who live in lower-income households (defined as households with annual incomes below $25,000) are less likely to trust the e-commerce environment. Their concerns about their financial safety online make them reluctant to make full use of e-shopping. Their attitudes about online shopping stand in sharp contrast to those of upper income online Americans.

Attitudes about online shopping: by household income

The number of people using the internet to do research about products or to do transactions online has grown since 2000, but revenues for online sales have increased at a much faster rate.

  • Some 22% of Americans said they had ever bought a product online in 2000, a number that grew to 49% in September 2007.
  • 35% of Americans said they had used the internet to do some product-related research online in 2000, a number that grew to 60% in September 2007.

At the same time, according to the Census Bureau, revenues for online purchasing have grown by nearly fivefold in this time period – from $7.4 billion in the third quarter of 2000 to $34.7 billion in the third quarter of 2007.

The big picture: Shopping on the internet has become commonplace among internet users for a number of different activities connected to researching and doing transactions online.

Almost all internet users (93%) have at one time or another done something related to e-commerce. That is, they have used the internet to research products and services, make purchases, book travel, trade stocks, or participate in auctions. On any given day, more than a quarter of internet users (26%) are doing something online related to e-commerce.

  • 81% of internet users have used the internet to do research about a product they are thinking about buying, with 20% doing this on the typical day.
  • 66% of online users have purchased a product online, such as books, music, or clothing, with 6% saying they do this on the typical day.
  • 64% have bought or made a travel reservation online, such as an airline ticket, hotel room, or rental car, with 4% doing so on the average day.
  • 26% have participated in an online auction, with 3% doing this on the average day.
  • 17% have paid to access or download digital content, such as a newscast, sporting event, or radio show; some 4% do this on the typical day.
  • 11% have bought or sold stocks online, and just 1% do this on the average day.

Four in ten Americans now use of the internet for banking, up from one quarter in early 2005.

When asked whether they have ever used the internet to do any banking online, some 39% of Americans said they had. This is an increase from 27% since February 2005.

  • Upper income Americans (those whose household incomes are over $100,000) are most likely to do online banking – 69% have.
  • Lower income Americans (those whose household incomes are under $25,000) are least likely to do online banking – 19% have.

One in four American adults now turns to online classified ads or sites such as Craig’s List, up from one in seven in early 2005.

  • Some 24% of American adults said they had used classified ad or sites such as Craig’s list in our September 2007 survey.
  • This compares to 14% who said this in February 2005.

Online Shopping: Internet users like the convenience but worry about the security of their financial information

  1. See the Appendix for detail on the statistical technique employed for these estimates.