Short-term online purchase development driven by Offline Loyal Shoppers’ occasional online purchases; sustainable e-commerce growth driven by continuously increasing loyalty

While the number e-commerce purchases fluctuates dramatically over the past six months, consumers’ overall share of spend online (reflecting the loyalty to the online channel) steadily develops and even increases during the same time period. But how are these two metrics – shopping frequency and loyalty, i.e. spend - related? How do both metrics, and their relationship develop over time? Are Heavy Online Shoppers (5+ bi-weekly online purchases) also Online Loyal Shoppers (75%-100% of monthly spend is online)? What are the key barriers for Offline Loyal Shoppers (0-25% of spend is online) to purchase online? And for Online Loyal Shoppers to purchase even more online? If merchants can innovate solutions confronting some of these barriers, the result will likely be both a significant growth of online purchase volumes - as well as less volatile short-term volume fluctuations.

Combining the shopping frequency and loyalty perspective leads us to identify two key forces that drive overall e-commerce development in the Netherlands, Germany and Norway. First of all we see the short-term driving force: online purchase fluctuations are primarily driven by Offline Loyal Shoppers’ occasional online purchases. The second force is a longer-term trend: the overall consumer base gradually becomes more loyal to online as a channel, slowly shifting more and more spend from brick-and-mortar stores to online as time goes on.

We need to note that we consider how lockdown measures could have impacted the development of e-commerce and loyalty. As we track consumers’ e-commerce behavior since March last year, we see all countries go through varying stages of lockdown. And as lockdowns become stricter, we expect e-commerce to lift – we clearly see this happening in 2020, with the apex of purchases at the height of Peak Season in December 2020. And then, as Peak Season ends and lockdown restrictions ease, we see e-commerce growth reduce, as expected. As brick-and-mortar stores open again in March, we would then also expect the share of online within consumers’ total purchases to reduce. However, we do not see that happen. Instead, survey results indicate that consumers’ share of online grows at a steady rate and has been doing so since September: this is yet another confirmation that loyalty to online channels is a growing habit for many Dutch, German and Norwegian consumers – 'the shift to online' is here to stay.

How are shopping frequency and loyalty (spend) related in e-commerce in March?

To find out what the relationship between shopping frequency and loyalty in e-commerce is, we look at the previously created segments Light Online Shoppers (1 bi-weekly online purchase), Medium Online Shopppers (2-5 bi-weekly online purchases) and Heavy Online Shoppers (5+ bi-weekly online purchases) and the correlation with previously defined segments Offline Loyal Shoppers (0-25% of spend is online), Online Semi-Loyal Shoppers (26-75% of spend is online) and Online Loyal Shoppers (76-100% of spend is online). And we see a correlation: the more a consumer purchases online, the higher the percentage of online spend is compared to offline – and vice versa.

But while the correlation exists, it is not 100%; this means that a number of Online Loyal Shoppers (atypically) did not make any purchases online in March. And it also means that other consumers who are generally Offline Loyal Shoppers made more than 5 bi-weekly online purchases in March - and are thus classified as Heavy Online Shoppers. It is precisely this volatility in purchase behavior that leads to the fluctuations in purchase volumes that we see happening over the past year. Exactly how big the impact is discussed further on in this blog.

What we also can conclude from the graphs below is that the vast majority of consumers that did not make any online purchases in March, did so because they are inherently loyal to brick-and-mortar stores. How can merchants attract Offline Loyal Shoppers to shift purchases to online channels? Find out later in this blog.

The Netherlands: 7% of Heavy Online Shoppers are ‘Online Loyal Shoppers’, conducting at least ¾ of their monthly spend online

In the Netherlands, 72% of consumers make at least one online purchase in March. The correlation between purchase frequency and online share of total spend is evident as consumers are reasonably concentrated from the bottom/left to top/right diagonal. We see that 7% of Heavy Online Shoppers are also ‘Online Loyal Shoppers’, spending 76-100% of their total monthly spend online. And of Medium Online Shoppers, 18% is also an Online Loyal Shopper. At the same time, an impressive 5% of Heavy and 15% of Medium Online Shoppers also shop offline, while 8% of Medium Online Shoppers is even more loyal to offline channels. And we also see that some consumers who are generally loyal to online do not purchase as much online compared to offline in March - and vice versa.

Germany: 6% of Heavy Online Shoppers are ‘Online Loyal Shoppers’, conducting at least ¾ of their monthly spend online

In Germany, 80% of consumers made at least one online purchase in March. The correlation between purchase frequency and online share of total spend is evident as consumers are reasonably concentrated from the bottom/left to top/right diagonal. We see that 6% of Heavy Online Shoppers are also ‘Online Loyal Shoppers’, spending 76-100% of their total monthly spend online. And of Medium Online Shoppers, 18% is also an Online Loyal Shopper. At the same time, an impressive 7% of Heavy and 19% of Medium Online Shoppers also shop offline, while 9% of Medium Online Shoppers is even more loyal to offline channels. And we also see that some consumers who are generally loyal to online do not purchase as much online compared to offline in March - and vice versa.

Norway: 3% of Heavy Online Shoppers are ‘Online Loyal Shoppers’, conducting at least ¾ of their monthly spend online

In Norway, 68% of consumers made at least one online purchase in March and 32% did not make any online purchases. The correlation between purchase frequency and online share of total spend is evident as consumers are reasonably concentrated from the bottom/left to top/right diagonal. We see that 3% of Heavy Online Shoppers are also ‘Online Loyal Shoppers’, spending 76-100% of their total monthly spend online. And of Medium Online Shoppers, 11% is also an Online Loyal Shopper. At the same time, an impressive 4% of Heavy and 15% of Medium Online Shoppers also shop offline, while 10% of Medium Online Shoppers is even more loyal to offline channels. And we also see that some consumers who are generally loyal to online do not purchase as much online compared to offline in March - and vice versa.

‘Online Loyal Shoppers’ group doubles in size between September 2020 and March 2021

The previous graphs, showing a snapshot of Light, Medium and Heavy Shoppers’ behavior in March, indicate that consumers’ short-term purchase behavior fluctuates. But looking at consumers’ behavior in that same perspective over a longer time, we see a clear loyalty pattern emerge over the past six months. This trend is visualized in below graphs by the ‘left to right movement’ - i.e. the shift in shopper segment size. These developments are similar in the Netherlands, Germany and Norway.

The Netherlands: Medium Online Shoppers increase online loyalty most with +8%

In the Netherlands, the total share of Heavy Online Shoppers is 14% in September (2% + 6% + 4%) and 13% in March (1% + 5% + 7%): the Heavy Online Shopper has not significantly changed in size. But the share of Dutch consumers who are Heavy Online shoppers and Online Loyal Shoppers increases from 4% to 7%: the share of consumers who make 5+ bi-weekly online purchases and spend 76-100% of their monthly spend online has increased +3%. When it comes to Medium Online Shoppers the development is more dramatic: the share of consumers who make 2-5 bi-weekly online purchases and spend 26-76% of their monthly spend online has increased +8%. In sum, we can conclude that Online Loyal Shoppers in the Netherlands (the yellow marked cells in the graph) grown from 17% in September to 30% in March – almost doubling.

Germany: Medium Online Shoppers increase online loyalty channels most with +9%

In Germany, the total share of Heavy online shoppers was 13% in September (1% + 8% + 4%) and 14% in March (1% + 7% + 6%), the Heavy Online Shopper has not significantly changed in size. But the share of German consumes who are Heavy Online Shoppers and Online Loyal Shoppers increases from 4% to 6%: the share of consumers who make 5+ bi-weekly online purchases and spend 76-100% of their monthly spend online has increased +2%. When it comes to Medium Online Shoppers the development is more dramatic: the share of consumers who make 2-5 bi-weekly online purchases and spend 76-100%% of their monthly spend online increases +9%. In sum, we see that the share of Online Loyal Shoppers in Germany (the yellow marked cells in the graph) grows from 15% in September to 28% in March – almost doubling.

Norway: Medium Online Shoppers increase online loyalty most with +9%

And in Norway, the total share of Heavy Online Shoppers is 7% in September (1% + 4% + 2%) and 8% in March (1% + 4% + 3%), the Heavy Online Shopper has not significantly changed in size. At the same time, the share of Norwegian consumes who are Heavy Online Shoppers and Online Loyal Shoppers increases from 2% to 3%: the share of consumers who make 5+ bi-weekly online purchases and spend 76-100% of their monthly spend online has increased +1%. When it comes to Medium Online Shoppers the development is more dramatic: the share of consumers who make 2-5 bi-weekly online purchases and spend 76-100%% of their monthly spend online increases +6%. In sum, the share of Online Loyal Shoppers in Norway (the yellow marked cells in the graph), grows from 9% in September to 18% in March – also doubling.

Offline Loyal Shoppers’ occasional online purchases drive short-term development, while Online Loyal Shoppers' repeat purchases drive long-term e-commerce growth

Zooming in even closer to the relationship between online purchase frequency and loyalty, we see that overlaying the overall purchase development growth rate (number of online purchases made per month compared to March 2021) adds further explanation to the forces at play affecting the development of e-commerce purchases. We can clearly divide the developments into two categories: short-term fluctuations and long-term developments.

As the share of Offline Loyal Shoppers decreases, overall online purchases increase – and vice versa. This means that this segment – making occasional online purchases – is the primary driver of short-term online purchase development fluctuations.

Another driver of short-term fluctuations in online purchases is that existing online shoppers at times buy less/more (as see in the fluctuations of the Heavy Online Shopper segment). Underlying these short-term fluctuations is a long-term driving force: the overall consumer base gradually becomes more and more loyal to the online channel as they shift their spend from brick-and-mortar stores to online. This is clearly visible in the continuous growth of the Heavy, Medium and Light Online Loyal Shopper groups.

As mentioned before, these developments, although amplified by lockdown measures and organic e-commerce growth, can be seen as an accelerated shift to e-commerce, creating behavioral habits that are likely here to stay for the long run.

The Netherlands: Online Loyal Shoppers steadily grow to 31% in March (from 17% in September)

In the Netherlands, the total share of Online Loyal Shoppers (pink segments in the graph) grows at a steady pace from September (17%) to March where they comprise 31% of Dutch consumers. The long-term ‘loyalization effect’ on online purchase growth can be clearly seen when benchmarking September and March; during both of these months the share of Offline Loyal Shoppers not having made a purchase are almost equal (22% compared to 21%), but overall e-commerce growth is significantly higher in September at +39% compared to +24% in March.

And looking at short-term fluctuations, driven by Offline Loyal Shoppers’ occasional online purchases, we see that the share of Offline Loyal Shoppers who did not make an online purchase is 22% in September while e-commerce growth is +24%. And as the share of Offline Loyal Shoppers not having purchased online declines to 12% of the Dutch population in December, online purchases peak at +88%. Looking at March, the share of Offline Loyal Shoppers who do not purchase online grows again to 21% and online purchases simultaneously decline to +39%.

Germany: Online Loyal Shoppers steadily grow to 28% in March (from 15% in September)

In Germany, the total share of Online Loyal Shoppers (pink segments in the graph) grows at a steady pace from September (15%) to March where they comprise 28% of German consumers. The long-term ‘loyalization effect’ on online purchase growth can be clearly seen when benchmarking September and March; during both of these months the share of Offline Loyal Shoppers not having made a purchase are almost equal (14% compared to 16%), but overall e-commerce growth is higher in September at +27% compared to +22% in March.

And looking at short-term fluctuations, driven by Offline Loyal Shoppers’ occasional online purchases, we see that the share of Offline Loyal Shoppers who did not make an online purchase is 22%. And as the share of Offline Loyal Shoppers not having purchased online declines to 11% of the German population in December, online purchases peak at +57%. Looking at March, the share of Offline Loyal Shoppers who do not purchase online grows to 16% and online purchases simultaneously decline to +27%.

Norway: Online Loyal Shoppers steadily grow to 18% in March (from 9% in September)

In Norway, the total share of Online Loyal Shoppers (pink segments in the graph) grows at a steady pace from September (9%) to March where they comprise 18% of Norwegian consumers. The long-term ‘loyalization effect’ on online purchase growth can be clearly seen when benchmarking September and March; during both of these months the share of Offline Loyal Shoppers not having made a purchase are almost equal (27% compared to 29%), but overall e-commerce growth is higher in September at +37% compared to +30% in March.

And looking at short-term fluctuations, driven by Offline Loyal Shoppers’ occasional online purchases, we see that the share of Offline Loyal Shoppers who did not make an online purchase is 27% while e-commerce growth is at +30%. And as the share of Offline Loyal Shoppers not having purchased online declines to 20% of the Norwegian population in December, online purchases peak at +86%. Looking at March, the share of Offline Loyal Shoppers who do not purchase online grows to 29% and online purchases simultaneously decline to +37%.

The key barriers for increased long-term online growth and less short-term fluctuations

How can merchants further increase the share of Online Loyal Shoppers and at the same time decrease the share of Offline Loyal Shoppers? In order to shed some light on this we look at the perceived barriers for online shopping – which aspects will make Offline Loyal Shoppers start purchasing online, and which aspects will lead Online Loyal Shoppers increase their online shopping even more.

Our analysis identifies quite consistent findings for both of these two segments, although there are dramatic size differences when comparing Offline Loyal Shoppers to Online Loyal Shoppers. The most important barrier to purchase more online is the ‘need to see, feel and try products. But the share that see this as a barrier is 47% among Offline Loyal Shoppers and 22% among Online Loyal Shoppers.

The following aspects stick out as significantly larger barriers for Offline Loyal Shoppers. At the same time, these barriers also prevent Online Loyal Shoppers from increasing their online purchases even more:

If merchants can innovate solutions that lift some of these barriers, the result will likely be both a significant growth of online purchase volumes - as well as less volatile short-term volume fluctuations.

What is next?

Up next is a blog post about the demands and satisfaction of new online shopper. Stay tuned!