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E-Commerce And The Sophisticated Buyer

Last week I had to drive out of town. Since I hadn’t driven there before, I was going to rely on my smart phone to help with directions. I decided to buy a windshield mount for my smart phone to make life easier. I researched online to find the best mount for my needs. After sorting through dozens of choices, I found what I was looking for and they had it in stock at my local “electronics store”.

ecommerce shoppersHowever, even though it was supposed to be in stock, the employee couldn’t even find that they ever carried this product “in store”. The products that they did have “in store” seemed to be of less quality and at double the price of the product I had chosen. I decided to go home and order it online, even though it wouldn’t arrive until after my trip.

Knowledge is Power. There are literally millions of shopping data points that can be analyzed and interpreted to see how consumer shopping habits are changing. Businesses are now able to price products based on empirical proof. This allows them to segment their customers and their customers’ buying habits. Proper segmentation leads to better profit margins. E commerce analytics are essential to executing this strategy.

Sophisticated Buyer: DefinitionA buyer that has the ability to evaluate the value and merits of their purchases. (Does not mean people that buy champagne and designer clothing.)

Retailers now know that the “Sophisticated Buyer” understands that the best price is usually available online. Sophisticated Buyers run the gamut from low income to high income households. Sophisticated Buyers also realize that the best way to get the most for their hard earned dollar is to plan ahead and have it shipped to their home. 

A lesson in “Sophisticated Buying” is being learned by Amazon. Amazon Prime membership is $79 per year. Prime members are allowed to watch free content, buy and rent content, AND get two day free shipping on their purchases. The most interesting “unintended consequence” of Amazon Prime is that people are now buying toothpaste, deodorant, aspirin, and other household goods online.

Amazon is concerned about the cost of free shipping on such low margin products. They are currently reviewing their  membership pricing and the possible need to increase that price. So if you don’t have to spend money on gas to drive to the grocery store and many times don’t have to pay sales tax, why wouldn’t a “sophisticated shopper” buy everyday products online and have them delivered to their home.

Brick and mortar stores are being resigned to the “impulse shopper”. These shoppers either don’t know how to use the internet to find the best value or they wait until the last minute to make their purchases.  This isn’t necessarily a bad thing for brick and mortar stores. They now know they CAN charge a higher price in store for the same product they sell online.

The lesson to be learned is that brick and mortar  stores need to focus on e-commerce as well as their in store sales. These two segments can be complementary if you understand your customers and your products. Your e-commerce strategy must be well thought out as there are many competitors in that space today. Your online store must be visually appealing, informative, and easy to navigate. Don’t get mad at online retailers, learn from them and adapt.