Retailers earn more from online than offline sales

Melbourne: Retailers offering customers an option to buy products online earn more revenue than those who only sell their goods offline, according to a new study.

The study suggests that customers spend more online because it is easier to locate items through the search function.

Junzhao Ma, a lecturer at Monash University in Australia studied how a larger selection of products available online affects consumer spending, using data from a large US retailer that specialises in apparel and offers both printed catalogue and internet shopping.

In particular, he examined the effect on the retailer's main products, offered in the catalogues and for which there was high demand, and the less-popular niche items that were available on the retailer's website but hard to find in its catalogues.

Ma found that online shoppers spent significantly more than catalogue shoppers on both popular and low-demand products - almost 11 percent more per customer per year on the main offerings and 250 percent more on the hard-to-find niche items.

Catalogue shoppers spent only 2.5 percent of their total on niche items, yet the category accounted for 8.4 percent of the total spending of online shoppers.

Ma suggests that customers spend more online because it is easier to locate items through the search function, especially the less mainstream items.

"Low-selling (niche) products are regularly pruned from the product line to reduce operational complexity and corresponding cost, but as shoppers grow more accustomed to the idea of searching for niche items online, carrying these niche products can not only yield additional revenue but also help retailers recruit and retain customers," said Ma.

The findings were published in the Journal of Retailing.