Study: E-Commerce Brand Names Trump Clever Marketing

A new study from ActivMedia Research shows that even the most aggressive e-commerce marketing strategies are unable to compete step-for-step with the power of brand names and built-in customer loyalty.

The report, titled Fashion & Style: Building Consumer Loyalty Online, states that "Today's online consumers buy from names they know and trust in the offline world. Branding and brand equity play a major role in certain online markets."

The report goes on to point out that, "Online markets for fashion and style products awoke in 1999, and promise to have a fabulous season in 2000. An influx of traditional mainstream shoppers to the Web in the past year has been encouraged by the arrival of traditional mainstream marketers who are no longer merely testing the potential for online sales."

Huge Market Potential

ActivMedia includes five product categories in the online fashion and style marketplace: clothing, jewelry and accessories, home and garden, furniture and appliances, and sporting gear. These segments generated $4.2 billion (US$) in online sales last year, according to the study.

However, according to ActivMedia, that figure is only "1.3 percent of the total $325 billion spent for these goods in the U.S. Clearly, the potential for online markets in fashion and style merchandise is huge."

Repeat Customers

The study reports that 40 percent of online buyers bought from at least one fashion and style category last year. "Most are loyal, repeat customers interested in product look-and-feel, branding, functionality and vendor accessibility, selection, price, convenience, service and reliability," the study states.

ActivMedia stresses the importance of customer loyalty. The company claims its study "dispels and disputes traditional wisdom that all online markets online are alike, that all consumers only seek bargains or novelty, or that 'first-mover' advantages are the key to long-term success in major online markets."

ActivMedia also takes a direct shot at competitor Forrester Research by arguing that, "All the marketing effort in the world cannot offset failure to develop loyalty in the online customer base. Pundits like Forrester and companies like IBM (NYSE: IBM) still mouth the early online wisdom that speed to market is the sure key to success, misinterpreting the experiences of early online categories like books and computers and misapplying their results when faced with newer online markets."

Best-Known Better than First

According to the study, coming to the market with a known brand name is as important, or more so, than getting to the market first. Just like in the offline world, the report argues, profitability and long-term success come down to the customer's ultimate opinion of the shopping experience and any follow-up contacts.

As most other research firms have concluded, customer service is emerging as the key determinant in the fashion and style categories.

"Loyal customers are willing to pay premium prices, ignore competitive pitches, transfer a greater share of market activity online, and cost less to service and support than new customers," ActivMedia says.

Different Characteristics of Market Segments

Despite similar conduct by all fashion-and style-conscious consumers, these online shoppers also exhibit some unique traits based on the category in which they are shopping, the study concludes. For example, in the clothing category, which dominates fashion and style sales , two-thirds of all clothing buyers make at least some purchases online.

These consumers divide their shopping between habitual repurchases, such as when they run out of socks, and "variety-seeking new looks," the study concludes. Fewer online shoppers -- only 25 percent -- turn to the Web for jewelry and accessories, and these shoppers are the least likely to purchase name-brand goods.

Furniture and appliances and sporting goods are two categories with highly established brands and high availability in the offline world, which makes price more important to online shoppers, the study reports.

Particularly in the furniture and appliance category, both strong product branding and easily accessible stores play a role in this decision, whereas loyalty in the sporting goods sector leans heavily toward the brand of the product itself rather than the retailer, the study says.