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Does the fast growing online shopping threaten the stores?



Does the fast growing online shopping threaten the stores?

Consumer’s spending power has recovered after the domestic economy regaining from financial crisis over the past year. According to the consumer index from Kantar Worldpanel, on average, Taiwanese households purchased FMCG products every four days in the past year which is even more frequent than the time before the global financial crises. Meanwhile, the visit of retail channels has been multiplying with average Taiwanese households purchased consumer goods from 14 different retailers. Apart from convenient store, hyper market, supermarket, PX-Mart, and drug/personal care stores, internet shopping has also been heavily favored. With the glooming economy recession vanished away, people are gradually getting rid of their conservative spending and price-orientated behavior, while online shopping is still preferred and being the fastest growing channel in the past year which attracts much attention from manufactures and retailers.

It’s estimated that one out of every three households purchases consumer goods online in 2011.

Based on the research from Kantar Worldpanel, number of households shopping online enjoyed double digit growth yearly since 2005. During the financial crisis, “Stay-at-Home” economy was getting prosperous which further encouraged Taiwanese to rely on online shopping. Even though the economy recovers now, online shopping remains its strong popularity.

Moreover, a wide variety of shopping categories from online shoppers is observed. Previously, online shopping is mainly associated with 3C, travel, and apparel related products, while nowadays, even FMCG goods such as haircare, tissue, body wash, crackers, ready to drink cereal, frozen food, …etc also attract more shoppers to purchase online. According to the Worldpanel data, one-fourth of the households have ever purchased consumer goods online in the past year. If with the same growth pace, it is estimated that one out of every three Taiwanese households will shop consumer goods online in 2011.

Pricing No Longer Being the Only Reason for Shopping Online

Research discovers that domestic online shoppers mainly purchase non-food consumer products online with its growth significantly outpacing food related products. In the latest one year, personal care related products attract up to 3 million traffics with 50% growth rate annually while female skincare and underwear products were the most popular out of all kinds. Although food related products show relatively slow growth, by no means shadow a few hero products such as health foods/drinks which have great performance with double growth in the past one year.

What really is the key selling point of online purchasing? In the past, it is generally perceived to be the price advantage, however, “price” might not be the only reason attracting consumers. Online shopping provides a platform for “anytime” & “anywhere” shopping experience to search for the best deals, consult other consumer’s feedback, enjoy the convenience of home delivery and refund/exchange services which bypassing many inconvenience and limitations with traditional ways of shopping. Moreover, online shoppers can search for novelty items which are rarely found in traditional channels, all together are the reasons why consumers choose online shopping. Therefore, manufactures hunger in embracing such wave of business opportunity must fully understand and satisfy the consumer need about the products and the service.

Did online shopping invade the business of the physical channels?

In order to catch up the market trend and avoid loss of sales, many manufactures and retailers have expanded to virtual area as a new battle field. However, “Did online stores threaten the business of the physical channels already?”— this is a question being asked often by all parties.

According to the Kantar Worldpanel analysis, there are two main factors driving behind the growth of online shopping: 1) existing online shoppers spend more for online. 2) new shoppers being attracted into online shopping. However, as the recent economic recovery has elevated overall consumer spending power, regardless existing or new online shoppers, the spending of all those shoppers on physical channels has not been found any decline but growth in accordance to overall market trend. Evidently, online shopping has not eroded into the brick-and-mortar stores. Instead, the features like convenience and cheaper price make online shopping successfully stimulate higher desire for additional consumption, thus enlarge the pie of the overall market.

However, even though the booming performance from online shopping is mainly contributed by extra demand from consumers, it doesn’t mean that online shopping will not invade the business of physical channels in the future. Therefore, strategies to counter the fast-growing online shopping will be certainly one of the most important challenges for all manufactures and retailers.

*To quote data from this article for any purpose, please specify that the source is from "Kantar Worldpanel Taiwan"

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