Online shopping trends survey
Xero’s survey of 1,000 consumers shows how small businesses fare against big online retailers and how they can compete in the future.
- Half of consumers are buying more online now than during the height of the pandemic
- Shoppers feel more loyal to big retail brands than small businesses
- Free and fast shipping options are expected
- Most consumers would buy from an online retailer they had not heard of
- Social, search and word-of-mouth are the best ways to reach new customers
Find out how online shopping trends create opportunities and challenges for small businesses.
Online activity continues to soar
50% buy more online now than during the pandemic.
Consumers clearly grew accustomed to the benefits of online shopping during Covid-19 and have stuck with it even as the crisis abated. Besides the 50% buying more now, 30% buy as much as during the pandemic which suggests many long-lasting habits were formed.
US cities that have embraced online shopping the most since 2020:
- San Diego and Phoenix – 75% buy more online now
- San Jose and San Francisco – 67% buy more online now
- New York – 65% buy more online now
In-person shopping still preferred, particularly by men
30% of consumers prefer in-person shopping (vs 24% prefer online).
Even though consumers are trending toward online shopping, most still prefer the in-person experience. Males were 1.5x more likely to choose in-person shopping, while females were only 1.1x more likely to prefer it.
Why people dislike online shopping (respondents could choose two reasons):
- 52% of consumers don’t like that they can’t inspect the product they’re buying
- 31% don’t like waiting for delivery
- 24% think returns are too hard
San Jose and Denver bucked the trend, with 67% and 53% respectively saying they prefer shopping online. Meanwhile, San Diego and San Antonio both came out the strongest for in-person shopping, with 50% of respondents from both cities preferring to buy that way.
Consumers more loyal to big retailers
27% of consumers feel more loyal to big retailers (vs just 14% for small retailers).
Small businesses have traditionally enjoyed an edge when it comes to loyalty, but that seems to be reversed online. While a 2020 Forester Study (commissioned by Xero) found that 69% of consumers were proud to buy from a local small business, that sense of localness is lost in the online world. The loyalty of digital consumers may be driven by factors that favor big retailers such as the digital experience, payment flexibility, pricing, easy returns, or fast and cheap delivery options.
San Francisco and Boston stood out as most loyal to small businesses, with 33% of respondents from those cities saying they felt more connected to small retailers.
- Let your story and passion come through in your website and branding
- Carry your brand story all the way through to how you package deliveries
- Include personal touches where you can, such as “thank you” notes with deliveries
- Ensure you offer the basics of ecommerce, such as free delivery
- Work on the digital shopping experience by including on-site search, and offering easy checkout with multiple payment options
Also, try to build an experience that minimizes the annoyances of ecommerce shopping:
- 52% of consumers don’t like that they can’t inspect the product, so ensure your shop at least offers detailed descriptions, good pictures and customer reviews
- 31% don’t like waiting for goods so offer express delivery options
- 24% think returns are too hard so offer a streamlined process
Free shipping is expected
25% of consumers want free shipping no matter how little they spend.
Big retailers – many of which offered free shipping as a loss leader – have conditioned consumers to expect it. Failure to match the offer could turn off potential customers.
This may be an issue of convenience rather than absolute cost. Separated shipping charges make it hard for shoppers because they don’t know the full price of a purchase until checkout. It also introduces extra steps to the checkout process itself. The key is to offer a simple, shipping-inclusive price and purchase process.
Tips to help small businesses compete on shipping:
- Use shipping brokerages, which negotiate special deals for small businesses by pooling demand from lots of vendors.
- Offer free snail-mail, with paid express options.
- Work out your average delivery charge and factor it into your pricing.
You’ll also need to pick up delivery charges on returns so do what you can to avoid them. Provide accurate product descriptions and pictures on your store and package products well to avoid damage en route.
People will buy from your unknown shop
72% of consumers will buy from a retailer they’ve never heard of.
Consumers don’t discriminate against emerging brands. You can win their trust quickly by getting some positive reviews onboard and offering a flexible return policy.
Reviews offer the most peace of mind so work hard to get them. Ask family and friends to get you started. Consider including hand-written requests for reviews with your shipments. If that’s not working, perhaps include a promotional offer as an incentive. Ensure people can find customer reviews on your site, or from your site. Meanwhile, you can get tips on how to handle bad reviews in the guide, Online reputation management for small businesses.
Return policies are the second-most important trust factor for consumers so take the time to publish a page that makes your approach clear.
Due to rounding, the ‘yes’ segments add up to 71% in this chart. When controlling for rounding, 72% say ‘yes they would buy from an unknown retailer’.
Social, search and word-of-mouth are the key to marketing
33% find new retailers on social media.
People are in browsing-mode and open to new retailers when on social media; in fact, a third of consumers say they commonly find new retailers that way. Search, word-of-mouth and marketplaces are also popular:
- Search allows shoppers to find retailers that supply a specific product they’re looking for, and it’s the most common way to find retailers among over-55s.
- Word-of-mouth shows that referrals remain important in an online world.
- Marketplaces indicate that you can get discovered by also marketing your products on big sites like Etsy, Amazon, or Facebook; this is often called multi-channel marketing.
San Antonio powered ahead on social media, with 67% of consumers finding new retailers that way – almost twice the national average.
While most people still prefer in-person shopping, the convenience of ecommerce is proving hard to resist, with consumers buying more online than ever before. But loyalty is hard won in the convenience-first world of ecommerce. Online shoppers don’t feel the same connection to small businesses, with most reporting higher levels of loyalty to big shops. A contributing factor may be that big, well-resourced retailers have better workarounds for the traditional downsides of online shopping. Namely, they offer well-designed shopping experiences with good photography and product descriptions, free shipping, express shipping, and easier returns.
Small businesses will need to match these “table stakes” in order to compete. Modern ecommerce tools, shipping brokerages, and well thought-out pricing models can help level the playing field. Meanwhile, small retailers shouldn’t let the disconnection of online transactions rob them of their identity. While face-to-face interactions go away, there are other ways to remind consumers that they’re dealing with an authentic, passion-driven brand.
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