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One of the realities of this tightfisted era — where even Amazon shareholders demand a profit — is that well-known brands, by virtue of their ability to attract customers, are also the ones best able to offer online bargains.

Susan Nolte is a discriminating online shopper. Nolte, a 26-year-old sales manager from Pelham, N.Y., rarely buys from Web sites she hasn't heard of. Instead she makes her online purchases from a handful of e-tailers she trusts — a book for her father from Amazon.com, a wedding present from Williams-Sonoma.com and clothes from Jcrew.com.

Nolte's husband, Chris, is also a discriminating online shopper — but of a different type. He likes to get recommendations on what to buy from people he trusts, and upon such encouragement, he'll patronize just about any Web site that offers the right deal. Recently, after receiving advice from members of an online community called Harmony-Central, the 27-year-old financial analyst bought software from a site he'd never heard of (MusiciansFriend.com) because the Oregon e-tailer offered it at the lowest price.

Online shopping may never again experience the kind of 150 percent annual growth that it did during the dot-com boom, but it remains a significant sales channel. While total retail spending is up 3 percent for the first six months of this year compared with the same period last year, business-to-consumer online sales are 13 percent higher, according to estimates by the National Retail Federation and Forrester Research. Even with the dot-com crash, online sales to consumers (as opposed to sales to businesses) are expected to keep climbing. EMarketer estimates that Internet sales will grow to $101 billion by year's end, a 69 percent rise from 2000 figures, and to $428 billion by 2004. “E-tailers have finally gotten their operations sorted out, and now can zone in on the customer,� says Helen Malani, an executive with the shopping portal Bizrate.com. Adds David Schehr, e-business research director with Gartner, the Stamford, Conn.-based consultancy, “Attracting business is now the greatest challenge. And understanding those customers is a new science.�

Indeed, online shoppers have their own psychology, and two distinct types of buyers are emerging: those who shop for convenience and those who shop for price. Susan Nolte makes her purchases online because it's easy; husband Chris approaches online shopping as if it's a kind of tech sport where the object of the game is to find the best price. Those differences are upending old stereotypes about how men and women shop. “Online shoppers are beginning to mirror the demographics of the population at large, but the Internet is a different shopping medium, which causes people to behave differently,� says Alessandro Isolani, the CEO of eBates, a San Francisco-based retail portal that hired Harris Interactive to conduct a large-scale study of online shoppers.

Isolani's observation is certainly true of the Noltes. In the offline world, Chris wouldn't dream of spending hours at the mall, browsing one store after another in search of a bargain. “I have been known to hit the after-Christmas sales at my favorite stores, but I don't really have the time or the desire to scope out every bargain basement in town,� he says. Online shopping is another story entirely. Before he begins to shop for his hobby, he usually logs on to Epinions, or a hobby-specific community like Harmony-Central or DanceTech to poll others about what to buy. Once he knows what he wants, he uses all available means to find it for the lowest price. His enthusiasm for bargain-hunting isn't confined to hobbies. When traveling, he always tries to score cheap airfare from a number of different sites. And he takes care of the family finances with Chicago-based Bank One's WingspanBank.com, which offers above-average interest rates.

As for Susan, she likes shopping at the mall, which she often uses as a social occasion, a chance to spend time with her mother. The two browse from one store to the next, and lunch together at the food court. Her online habits are more matter-of-fact exercises in expediency. Because she works a busy sales and marketing job, shaving off a few dollars here and there is not a priority. She squeezes in time between conference calls and during short breaks from work to shop online. She can eye a site and tell if it's reputable, but finds herself using many of the same sites repeatedly, sites she trusts, often because she has shopped at their affiliated stores offline.

About 70 percent of all Internet shoppers today are evenly split into one of two main categories: Bargain Hunters or Convenience Shoppers. In June alone, these categories accounted for 9.2 million of the 13.1 million households that shopped online that month, according to Forrester Research estimates. In an attempt to discover the demographic composition of these two types of shoppers, eBates commissioned the report from Harris Interactive. Harris polled 3,000 online consumers in an attempt not just to divide people into conceptually defined clusters, but also to get information on the attitudes, habits and technological savvy of Net shoppers.

The study carves online shoppers into six segments: Hooked, Online & Single (which Harris estimates at 16 percent of total online shoppers), Hunter-Gatherers (20 percent), Time-Sensitive Materialists (17 percent), Brand Loyalists (19 percent), E-Bivalent Newbies (5 percent) and Clicks & Mortars (23 percent). According to eBates' Isolani, four of the six Harris segments fall neatly into either the Bargain Hunters or Convenience Shoppers categories. Here's a profile of which segments fall into which group.


The groups classified as Hooked, Online & Single and Hunter-Gatherers (which together account for 36 percent of all online shoppers) are most likely to agree with the statement: “If it's the lowest price, I'll buy from a company I don't know.� They are also the most likely to “compare prices of various merchants� and to “use the Internet to figure out exactly what product they want.�

According to Harris, Hooked, Online & Singles are mostly 18- to 29-year-old males who earn between $50,000 and $90,000 a year. They are by far the most technologically sophisticated users and spend $120 a month online, the second-most of all the segments. They like auctions and tend to buy from almost every product category. They've been online for five years on average, and started cyber shopping two to three years ago. They are discriminating consumers who value high-end products. And, like Chris Nolte, they play ball with coupons, rebates and other discount offers. Flexo Hiner & Partners, a market research company based in Long Beach, Calif., calls this group e-discounters — affluent folks, mostly male, who are well-educated and early to adopt new technology.

Hunter-Gatherers are older and more price-conscious. They tend to be married, between the ages of 30 and 49, with children in the house. Hunter-Gatherers resemble the general population, and therefore are less tech savvy. At the time of the survey (June 2000), they had made their first purchase online only six to 12 months before. They tend to use fewer coupons and rebates and seldom visit price comparison sites, like MySimon or Bizrate. But they're still relatively fearless online. They don't mind going to sites they don't know, and don't worry about the hassle of making returns.

Hooked Online & Single and Hunter-Gatherers do not go uncourted online. The many sites and services that cater to price-sensitive shoppers are evidence of their proliferation. Dozens of e-mail notification services, such as SmarterLiving.com and Colonize.com, fill inboxes with the cyberspace version of direct mail coupons. “Price is a tangible way to differentiate among offerings,� says Steve Hans, associate vice president of brand marketing at MySimon, a company that trawls the Net for products that it lines up against each other to save bargain shoppers time.

Price competition obviously doesn't help any company's margins, but it's a natural byproduct of the Internet, says eBates' Isolani. PricewaterhouseCoopers, in a survey conducted during the 2000 Holiday shopping season, found conclusively that, “relative to Internet shopping, savings or a low price is one of the most compelling reasons that consumers shop online.�


The folks identified as Time-Sensitive Materialists and Brand Loyalists by Harris probably don't mind a deal — but won't change their shopping destination to find one. These two groups (which constitute 36 percent of online shoppers) are the most likely, besides novice shoppers, to say they would never buy from a company they do not know.

To the Time-Sensitive Materialist, time is worth more than money. Harris estimates that almost 20 percent of the these shoppers earn six-figure salaries, making them the most affluent segment. Time-Sensitive Materialists are also not technophobes. They have been online for three to five years, and prefer practical uses of the Web. They are more likely to manage their money online than to seek entertainment there. They like to buy clothes online, and usually start shopping by typing in a retailer's URL. They could care less about auctions and other price-saving gimmicks. Time-Sensitive Materialists also tend to be men (62 percent compared with 55 percent of all online shoppers). These customers also tend to be the best-educated of all the groups: 55 percent have college degrees, compared with 46 percent of all online shoppers.

Brand Loyalists have similar attitudes to Time-Sensitive Materialists. The main difference is that they are not so obsessive about time — instead, they just seem to trust brands for the brands' sake. Chris Nolte's favored music site, MusiciansFriend.com, would not cut it with these folks. Brand loyalists are most likely to be women who enjoy shopping. They buy lots of what Gartner's David Schehr calls shrink-wrapped goods: books, DVDs, CDs and software. Like the Time-Sensitive Materialists, they start shopping by typing in their favorite stores' URL, but have more time to actually use the coupons that their favorite sites send their way.

Some of that intensified brand loyalty may be derived from concerns about the lack of face-to-face contact associated with the medium. “Customers are not willing to save a small amount of money to risk not getting the level of security or customer service, and tend to give their business to the brands they feel comfortable with, such as Amazon or Barnes and Noble,� says Daniel Saul of Smarter Living. Steven Skinner, a retail practice partner with Accenture, the global management consulting firm, thinks that customers narrow their brand loyalties even more once they're online. “Tolerance is low online,� Skinner says. Whereas before, customers were limited by the bookstore that was in their mall, and perhaps tolerated limited selection or poor service because they had to, the Internet allows customers to jump instantly to a better site.

CompUSA learned that lesson the hard way. As a top computer seller, CompUSA is a recognized retailing brand. Its computer superstores dot the sides of highways throughout the country. But when it first went online in October 1999, it chose to brand its online presence as Cozone.com. Despite its deep pockets, the site failed to attract customers, and closed down five months after it was launched. Customers were immediately re-directed to CompUSA.com. The day Cozone's lights went out, CompUSA spokeswoman Suzanne Shelton told The Boston Herald, “There are so many competitors out there with new names. It's hard to distinguish one from another.�

One of the realities of this tightfisted era — where even Amazon shareholders demand a profit — is that well-known brands, by virtue of their ability to attract customers, are also the ones best able to offer online bargains. That's why Chris and Susan Nolte will sometimes cross paths while shopping in cyberspace. As a Boston Consulting Group report advises, a good brand is key to lowering the cost of acquiring new customers. This is particularly evident in the apparel sector. And as a McKinsey & Company research report written by consultant Joanna Barsh counsels, “in highly brand-sensitive categories like apparel, multichannel retailers can spend as little as one-third or even one-fourth of what their pure-play rivals pay for that purpose.� That's why Susan can be wooed by a bargain offer e-mail from J.Crew. The clothing retailer has the infrastructure to ship clothes to people quickly and already has a loyal following. The only thing missing from the “value proposition� is the right price, as Michael Silverstein, head of the Global Retail practice at Boston Consulting Group, puts it. With that, Susan might well find herself bumping into her bargain-hungry husband.

In fact, clearance sections of brand-name sites may be how retailers can tap both the Bargain Hunters and Convenience Shopper segments. “I have only really seen clearance sites pop up in the last six months,� says Lori Iventosch James, a Harris director who worked on the segmentation study. Build a bargain basement online, and both Chris and Susan will come.


Online shoppers can be divided into six segments, four of which fall into the bargain hunter or convenience shopper categories.

American Demographics Grouping Convenience Shoppers Bargain Hunters As Yet Undefined
Harris Segment Brand


Hooked, Online

& Single

Clicks &


Percent of Total 19% 17% 16% 20% 23% 5%
Male 54.1% 62.5% 66.2% 51.8% 46.3% 53.2%
Female 45.9% 37.5% 33.8% 48.2% 53.7% 46.8%
High school or less 22.5% 16.7% 17.3% 19.6% 30.8% 15.4%
At least some college 60.6% 56.4% 67.4% 64.3% 62.0% 63.9%
Post-grad 16.8% 26.9% 15.3% 16.2% 7.1% 20.7%
Less than $25,000 6.8% 4.8% 7.5% 9.7% 17.3% 13.5%
$25,001 - $49,999 29.0% 20.4% 26.1% 26.9% 22.4% 27.8%
$50,000 - $99,999 38.2% 39.1% 43.7% 37.1% 38.5% 41.9%
$100,000 or more 16.7% 19.4% 13.9% 19.1% 11.4% 10.9%
Decline to answer 9.4% 16.3% 9.0% 9.3% 10.3% 5.8%
â–ˆ AGE
18-29 27.6% 20.0% 29.6% 17.3% 28.1% 14.9%
30-39 26.6% 26.9% 28.6% 32.4% 26.8% 29.9%
40-49 23.3% 26.5% 24.0% 32.0% 30.8% 30.5%
50-64 19.4% 21.6% 15.9% 14.7% 11.3% 16.2%
65 or older 3.1% 5.0% 1.9% 3.6% 2.9% 8.4%
Less than a year ago 7.6% 6.6% 5.6% 9.1% 11.6% 16.2%
1 Year to 3 years ago 28.4% 29.4% 35.0% 38.1% 34.1% 38.1%
3 Years to 5 years ago 36.8% 39.6% 26.2% 28.3% 25.7% 25.2%
5 Years ago or more 27.3% 24.6% 33.3% 24.4% 28.5% 20.6%
Less than a year ago 26.8% 28.0% 27.6% 37.9% 39.8% 42.9%
1 Year to 3 years ago 53.5% 49.6% 53.6% 45.6% 34.0% 44.1%
3 Years to 5 years ago 16.8% 19.4% 15.5% 13.7% 15.3% 6.5%
5 Years ago or more 3.0% 3.0% 3.3% 2.8% 10.9% 6.5%
Always 6.3% 0.8% 8.6% 5.4% 7.2% 11.0%
Sometimes or often 66.5% 33.2% 64.2% 49.3% 58.3% 34.8%
Rarely or never 27.3% 65.9% 27.2% 45.2% 34.4% 54.2%
DEFINING ATTITUDES To begin a search, I type the Web site address of a merchant I knew who sells the product. Shopping on the Internet saves me time. If it's the lowest price, I'll buy from a company I don't know. To begin a search, I go to a site that compares products and prices. I worry about giving out personal data. I like to deal face-to-face with people while shopping.
Source: eBates/Harris Interactive, American Demographics analysis
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