Customers who were surveyed in this study of online buying habits
said a majority of their PC spending would go online in 2002. The
research, by leading channel consultants Canalys.com, reveals why
they will do it and who they will do it with. Whether you're an IT
supplier or a user, read this report to stay ahead of the
game.
Over the past few months on cw360.com, analyst firm Canalys has
looked at hype, reality and change in the IT industry in Europe:
how new business models have emerged and often failed; how old
models have been re-invented and survived; and how the industry
must now win over an increasingly sceptical customer base. In this,
the final report in the series, Canalys highlights some of its key
findings based on unique end-user research it conducted in March
this year with senior IT buyers in Europe.
Background to the survey
In March 2001, Canalys conducted
extensive primary research into the online IT buying behaviour of
medium and large businesses (those with at least 100 employees) in
France, Germany and the UK.
The survey was targeted specifically at senior IT staff who are
already buying IT equipment online, either over the Internet or
through dedicated e-procurement links. The aim was to study their
experiences and intentions, in order to see where suppliers are
succeeding, where they need to concentrate their efforts, and how
existing relationships between buyers and suppliers might
change.
The survey was conducted using a combination of online and
telephone research techniques. The analysis is based on 155
completed interviews. It is important to remember when looking at
the results that this survey was conducted with experienced online
IT buyers and the levels shown for current buying activity should
not be generalised to the total business population.
Two
 | | "Despite the projected increase
in the proportion of business conducted online, it is clear that
telephone and face-to-face contact with suppliers remains
important." | | | | | |
| | Canalys.com | | |
|
|
years ago, buyers could reasonably expect prices of products bought
online to be lower than their offline equivalents, but this is no
longer true. Low prices, often subsidised by venture capital
injections or driven by fear of losing share to new online
competitors, are largely a thing of the past. Hybrid channel
strategies from most large vendors are now accepted and, as the
channel matured, prices levelled out across direct and indirect
channels. So if price is no longer the main motivator and
differentiator for buying online, what is - and where are buyers
conducting their online business?
The most likely suppliers
The Canalys survey shows
clearly that the standard public Web sites of both vendors and
resellers are the most commonly used methods of ordering online,
with more than half the respondents mentioning each. Vendors'
public Web sites are also the key first source for product
information prior to the sale, across most IT product categories
(with the exception of consumables/spares, where catalogues and
reseller sites tend to be the first ports of call).
Ordering from customised sites provided by vendors or resellers was
mentioned by around a fifth of respondents, while sites offering
auctions or other dynamic pricing environments bring up the rear
with only around 10% of online buyers using them at all and
two-thirds of these using them no more frequently than once a
quarter. While such innovative new ways of buying may have received
a lot of interest in the media, they are yet to make a serious
impact when it comes to changing customer behaviour.
Spending is on the increase
But this doesn't mean that
online buying in general is faltering. The proportion of the total
corporate IT budget being spent online is set to increase
dramatically over the next 12 months, which is an indication that
customers are satisfied with and have increasing confidence in the
online buying solutions available to them.
Respondents estimated that just under 50% of their budget for
desktop and notebook PCs was spent online in the previous 12 months
and that this would rise to more than 70% in the coming year.
Similar increases were predicted for other product categories, even
those for which current online buying levels are relatively low,
such as servers and networking hardware; though these will continue
to trail behind the other categories. UK respondents are already
spending a higher proportion of their budget online than their
French and German counterparts and this will still be true a year
from now.
It is worth noting also that respondents in all three countries
mostly reported that their total IT budget for the next 12 months
had increased, with 30% saying it had increased more than 10%. This
is will come as welcome news in the light of recent speculation
that the economic downturn in the US would spread to Europe and hit
corporate IT spending here.
The human touch
Despite the projected increase in the
proportion of business conducted online it is clear that telephone
and face-to-face contact with suppliers remains important.
Regardless of whether the customer preferred vendors or resellers
as their online supplier, 70% said they still enjoyed a close
verbal relationship with them.
One conclusion we draw therefore is that the majority of online
buying is conducted as part of a larger relationship with a channel
partner. Customers still want suppliers to face up to their
responsibilities if something goes wrong and around 40% still
conduct some kind of personal negotiation with their suppliers
prior to an online purchase. This is not terribly surprising, but
at the height of the hype, many would have been forgiven for
believing that human relationships would cease to be a critical
component of the new e-business economy. As the survey clearly
shows, the opposite is in fact true and the fundamental elements of
conducting business have not radically changed. This goes some way
to explaining the relatively weak impact made by new entrant
e-resellers and gives an indication of their future
prospects.
Motivators and barriers
If the "offline component" is
so important then why order online at all? The survey results show
quite clearly that online ordering is faster and that customers
value the availability of up-to-date stock and order-tracking
information. More than 90% of respondents mentioned these as
important reasons for purchasing online and 60% mentioned one of
these as the single most important reason. In short, the ordering
and follow-up process is made much more efficient, saving the IT
department valuable time. Although many respondents still mention
better prices as a factor, less than 10% cite it as the main reason
for buying online.
Given the generally positive responses towards online buying that
the survey has revealed, it is worth looking at the reasons why
online buying levels aren't even higher amongst this active group.
The reasons vary across the countries.
In the UK, where overall acceptance of online buying is highest,
the most common reason given, by two-thirds of the respondents, is
that their preferred suppliers simply do not offer online ordering.
This reinforces the point made earlier that relationships with
trusted suppliers are critical: where they exist, even if those
suppliers are "offline", a new online competitor will not easily
displace them.
In France, where the move to online buying has progressed more
slowly, more than half the respondents cite the same reason.
However, unlike in the UK, in both France and Germany concern about
the security of financial transactions also ranks very high on the
list. Indeed it is the most common reason given in Germany, by 57%
of those surveyed. These results are consistent with having a more
established mail-order/credit-card culture in the UK.
Where the culture exists, consolidation follows
Perhaps
one of the most interesting results from this survey is the
reaction to a question asking respondents to what extent they
agreed or disagreed with a series of statements relating to their
organisation's online purchasing behaviour. The statement that
received most agreement in France (74%) and Germany (57%) was that
they conduct research online, but still prefer to place orders
offline. Bearing in mind this was a sample of people already doing
some online buying, these figures are quite high and reflect the
lingering security concerns mentioned earlier.
In the UK, the statement that resonated the most - 68% of
respondents agreeing or strongly agreeing with it - was that as a
result of being able to buy IT products online they now dealt with
fewer suppliers. 60% also agreed that online tools meant they spent
less time negotiating prices and 40% had increased purchases with a
particular supplier as a direct result of having a "great online
experience". These all point to the fact that buyers often perceive
it a false economy to spend time shopping around for the lowest
price: the real saving is in reducing the time spent on the
procurement process itself.
Conclusions
1. The needs of online and offline buyers are similar and
relationships remain key
2. Vendor Web sites are an important source of product
information
3. Customers will use the sites that save them time
4. Customer behaviour changes slowly, but online share is
increasing
So what do these results tell us? One overwhelming conclusion is
that Web sites, and particularly those of the vendors rather than
the resellers, are a vital source of product information,
regardless of whether orders are placed online or offline. This is
basic function of most sites and it is crucial that vendors achieve
excellence in this area above any other.
The second conclusion is that online and offline buying behaviour
are not that different: customers want easy access to product and
availability information, fair pricing and efficiency in the
ordering process, from suppliers they can trust. The channel most
likely to meet those needs will get the business - whether online
or offline.
Thirdly, customers do not change their behaviour quickly: they
still demand human contact. Innovative online buying systems will
be adopted only slowly and innovation alone is no substitute for
brilliant execution. The key aim must be to save the customer time
and to put information and control of the ordering process in the
customer's hands. A best-in-class online solution can ultimately
draw business away from competitors.
The speed at which customers will switch their IT procurement
online varies by country and is dependent to a large extent on
cultural factors surrounding existing buying processes. There is
inertia and lingering concern about transaction security, but it is
clear that among those who have made the switch there is a high
degree of satisfaction. Business is flowing towards those who offer
the best solutions and not necessarily the lowest headline
prices.
Canalys - expert analysis for the hi-tech
industry
Canalys specialises in providing high-quality
market analysis and advice to the leading technology vendors
operating in Europe. It provides continuous analysis services for
marketing managers and strategists within blue-chip IT, telecoms,
and consumer electronics companies. Canalys offers three continuous
services: Mobile Analysis, E-business Analysis, and Channels
Analysis. It also undertakes confidential consulting
projects.
Exclusive offer to CW360 - get the full
report
But not only the full report: get an hour of
analyst time with Canalys.com too - and all at a special-offer rate
of $1,000 - a fraction of the usual cost - exclusive to CW360.
Contact Canalys, referencing 'CW360 offer':
www.canalys.com/contact.htm