Would you believe older men with lower incomes are the new drivers of online sales growth?

Discussion
Sep 20, 2018
Matthew Stern

Online sales continue to grow at double-digit rates, and there are some new factors in play driving it — not all of which are named Amazon.com. Ken Cassar, vice president of strategic insights at Rakuten Intelligence, and Nikki Baird, vice president of retail innovation at Aptos, discussed what new e-commerce shoppers looks like and how various segments of the retail industry should react to these new buyers in a RetailWire webinar yesterday. [View the recording.]

According to statistics presented by Mr. Cassar, two years ago the average online buyer was spending $1,700 per year, whereas more recently that number has increased to about $2,000.

It is increased buying frequency, however, not increased basket size, that is leading to these results. In fact, the average basket size has shrunk during the same timeline, dropping from $54 dollars two years ago to $50 this year.

Regarding the new emerging type of e-commerce customer, Mr. Cassar noted that 56 percent of the 36 million shoppers who began using e-commerce in the past two years are male, older and in lower income brackets. Their spending habits tend more toward electronics, automotive and sporting goods than earlier e-commerce shoppers. And perhaps surprisingly, only 27 percent of these new e-commerce shoppers are going to Amazon, compared to 34 percent of old e-commerce shoppers.

Because of this, Mr. Cassar pointed to the value channel as a possible path to e-commerce success.

“There’s a clear opportunity here in the dollar channel, which collectively has not done an awful lot online,” said Mr. Cassar.

Ms. Baird noted that the Amazon buying experience, while familiar, is in reality not that simple and that selling on the marketplace can be quite risky, presenting possible openings for CPG companies looking to find other online avenues to new shoppers.

“Where they can differentiate is in that simplicity of the buying process,” Ms. Baird said.

Mr. Cassar pointed to the need for brands to think creatively about how to incentivize purchases in order to increase average order size. Ms. Baird praised the predictability of the subscription model and saw room for brands to assess and react to pain points to make the subscriptions more valuable to customers.

DISCUSSION QUESTIONS: How focused should retailers and brands be on trying to court the “new” e-commerce shopper? Do you see opportunities for other retailers or brands to take significant share from Amazon in the coming years despite the popularity of Prime?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I think this reminds us to never underestimate consumers, and to stop focusing only on the generations that are new and shiny. "
"On first blush the realization of this new e-commerce shopper is surprising, yet once exposed, it is logical. "
"Great call-out on “new and shiny” demographics, Georganne! The other factor is that most of us have reduced our consumption and are doing our buying JIT."

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17 Comments on "Would you believe older men with lower incomes are the new drivers of online sales growth?"


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Chris Petersen, PhD.
BrainTrust

Retailers and brands should focus on the “new” e-commerce shopper IF they have the capabilities to harvest data at the individual level, and the CRM to market and personalize for these customers. The research quoted sounds like the “old” market segmentation strategy based upon demographics of a group. Success in e-commerce requires the ability to market to a “segment of one” and build ongoing relationships with individuals. In terms of acquiring and retaining new customers, Ms. Baird is most definitely on target about differentiation through simplifying the buying process. Ease of use and simplification apply as differentiators for any age group.

Charles Dimov
Guest

If you are in the “electronics, automotive and sporting goods” sectors … then you should definitely take heed. This new e-commerce shopper can be a boost to current sales (add-on business rather than AOV growth).

Other retail brands should focus on simplicity (five to seven choices rather than 100+), the opportunity to get it immediately or experience it directly in-store, and focus on the human element (opportunity to speak with an expert). Don’t try to out-Amazon, Amazon. Find a niche, put some effort toward this new customers group and differentiate.

Ralph Jacobson
BrainTrust

These insights are more examples of why marketers must not lump all demographics together. Even older, low-income men are different. You need to gain further insights into your shoppers and your wider target audience with shopper analytics tools that can actually “move the needle” for your share to take impact away from your competition.

Nikki Baird
BrainTrust
Well, one behavior identified in the research was that these new shoppers are not naturally attracted to Amazon — they’re much more focused on value and I expect brands that are more familiar to them from a direct shopping experience, like Walmart (though I was surprised to see Wish as the #2 on the list of benefiting from these new shoppers). The challenge with this (yes, demographically defined) segment is that it, to be blunt, is not a growth segment. But it is one that has needs that someone will figure out how to profitably serve. And to Chris’s point, there will be a lot of different interests and behaviors within the demographic — it is by no means a monolithic segment. But there is one defining behavior of this group: they have only started shopping online in the last two years. So if you think they know what a “hamburger” in the top left corner of a screen is, or if they understand what PayPal or BillMeLater is, or even what the Verisign seal… Read more »
Art Suriano
BrainTrust
The article failed to say how old these male customers are and how low is their income. Regardless though a few facts come to mind. 1.) We are all living longer, and Baby Boomers make up a healthy percentage of our population. Those that are retired have time on their hands to surf the net, and they’re doing just that. 2.) It’s easy for them to sit on their couch, probably with the TV on and peruse through the many items of interest online. So for these reasons, we can see why this market is growing. Retailers should capitalize on this opportunity by offering this group conveniences like an option to view a website with larger type, special offers for senior citizens and possibly buying clubs they can join with even more incentives. As for competition, we’re already seeing many e-commerce companies competing with Amazon and we will continue to see more, which is what happens when entrepreneurs see opportunities to make money when another company shows signs of success. Amazon will continue to face… Read more »
Neil Saunders
BrainTrust

I don’t agree that there is a massive opportunity for the dollar channel online, as is stated in the article. There is some, but the low margin, high volume model does not lend itself to the high cost nature of online fulfillment.

Moreover, how may electronics, sporting and automotive products – which is what these “new” shoppers supposedly want – are sold by dollar stores. Not many, because the prices for all of these items are way above the dollar (or even $5) mark.

Georganne Bender
BrainTrust

I think this reminds us to never underestimate consumers, and to stop focusing only on the generations that are new and shiny.

Look at this from the perspective of an “older male consumer from a lower income bracket” — to him shopping isn’t always fun. At least that’s what we hear in focus groups. It’s easier to shop online where he is the most important customer and is not ignored by sales people, which is likely to happen on a sales floor. He can shop without distraction and not have to make excuses for whatever he buys.

This also shows that there is room online for retailers other than Amazon to do business and that consumers look for variety even in an online experience. And as Nikki said, in simplicity of the buying process.

Rich Kizer
BrainTrust

Georganne: Right on! Here’s another thought: just as the huge wave of Boomers created business opportunities in their younger years, now today, retired and with money, perhaps the wave is slower but is now creating another wave of opportunity of convenience and ever-present shopping opportunities. Just a thought.

Patricia Vekich Waldron
Staff

Great call-out on “new and shiny” demographics, Georganne! The other factor is that most of us have reduced our consumption and are doing our buying JIT.

Georganne Bender
BrainTrust

Thanks Patricia! This Baby Boomer is tired of being invisible.

Dave Nixon
BrainTrust

If this segment is identified as a growth opportunity then YES, they should target these new shoppers. But retailers will need the capability to engage these folks at a personalized level versus this more general segment level. Then they have a much better chance of driving additional revenue with this new insight into this new buying demographic.

Adrian Weidmann
BrainTrust

On first blush the realization of this new e-commerce shopper is surprising, yet once exposed, it is logical. Typically, males don’t like the shopping process. To us, it’s a mission with a specific objective — not a journey of discovery. Being able to use online search engines to locate very specific items IS the new shopping. As a serious DIYer, I’ve been helping my son renovate his first home. We located and purchased the significant percentage of electrical, plumbing and lighting fixtures online. We had very specific requirements and online searches allowed us to find the exact specifications — something that is often near impossible at the local home improvement store. Retailers or online marketplaces that can assist that focused search could find a very receptive audience.

Ananda Chakravarty
BrainTrust

This is a great opportunity for retailers. Loyalty begins with first impressions, and for capturing new online shoppers in older generations that still believe in loyalty, this becomes a solid play. As for taking share from Amazon, that’s a bit different and far more challenging — this is more about growth of online shopping. The pie may be bigger, but the portions will be the same. Amazon has already reached critical mass and is mainstream, meaning that even new online shoppers will eventually be exposed to it — so some movement, but not substantial.

Craig Sundstrom
Guest

I think this is a little misleading. A large number of NEW online shoppers may be older low income males — which completely makes sense since they’re probably one of the few demographics left (that wasn’t already shopping) — but only a small percent of ALL shoppers are. Whether brands should “court” this customer, assuming there’s some logic in it (no diapers or college loan forgiveness programs, please) should be judged in the same way any other targeting is.

As for the shrinking basket size: why does it matter? Presumably because companies will lose even more on shipping…”free shipping” continues to be the Gordian Knot of online profitability.

David Naumann
BrainTrust
David Naumann
Vice President, Retail Marketing, enVista
1 year 2 months ago

The “new” e-commerce shoppers that are older men with lower income levels are likely not high on radars, but probably should be. In addition to this group, I assume there is also gradual growth among all older age groups as more of these late adopters of technology are have more time to learn and try new technologies. As discussed, the key is to make the experience with your brand’s website as frictionless and personal as possible to build loyalty.

It is hard to say if brands can take marketshare from Amazon, as the Amazon experience is pretty darned good. You need to out-Amazon Amazon.

Dan Frechtling
BrainTrust

Older males appear to gravitate to BOPIS (Buy Onilne, Pick Up In-Store) more than other demographic segments. This is an opportunity to cater to them in a way Amazon doesn’t fully deliver.

While 61% of consumers overall have tried BOPIS, 71% of Baby Boomers have done so, according to a study by ForeSee. Interestingly, Millennials are below average, at 57%.

And despite the fact Millennials “seem” impulsive, Boomers are most likely to make an impulse purchase during a BOPIS trip, as indicated by ChargeItSpot research last year. And they have more disposable income to spend.

The early adopters of BOPIS included Best Buy, AutoZone, and Dick’s Sporting Goods, which tracks with the electronics, automotive and sporting goods categories that skew older male, as Mr. Cassar pointed out.

Amazon is trying flavors of BOPIS, first with lockers, then with Whole Foods. But omni-channel branded retailers will have an advantage, first because of consistent branding, and second because of cross-sales opportunity once in-store.

Susan Viamari
BrainTrust

I don’t think there’s any demographic that is immune to the convenience, money-saving and novelty that e-commerce can offer, so this isn’t all that surprising. It has just taken some shoppers longer to build trust than others. With that said, brands should focus on developing a strong brand story and use research and data to listen to their consumers – you should only focus on courting the newest e-commerce shoppers if it makes sense for your brand to do so, not just because they’re the latest consumer segment of interest.

wpDiscuz
Braintrust
"I think this reminds us to never underestimate consumers, and to stop focusing only on the generations that are new and shiny. "
"On first blush the realization of this new e-commerce shopper is surprising, yet once exposed, it is logical. "
"Great call-out on “new and shiny” demographics, Georganne! The other factor is that most of us have reduced our consumption and are doing our buying JIT."

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