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The Fifth Type of Buyer: Customer Preference for Online Shopping

I recently attended a networking event for my alma mater in New York City.

The event was geared toward professionals in the real estate industry, so my strategy was to try and connect with some developers who might be interested in learning about our products. I left with a few contacts and overall, I was happy I attended.

One of the folks I met was Michael Mintz, CEO of MD2 Property Group (also called “MD Squared”), a property management firm based in Manhattan. I was impressed by Michael; he’s younger than I, and in the short amount of time we spoke that night I learned that he was also the founder of his company.

In just under three years, Michael had produced organic growth to the tune of 900+ units under management. But what really left an impression on me during our conversation was something he mentioned about his buying patterns.

Customer Preference for Online Shopping

During our conversation, I mentioned that we might be able to help him with some of the commoditized products he uses to maintain the units MD2 manages.

As soon as I said it, he informed me that he recently started buying some products online. I half-jokingly said, “How’s that working out for you?”

Without hesitating, Michael responded, “It’s actually awesome—we sometimes get the products faster and in some cases, we’re saving a lot of money.”

Since leaving the event that night, this conversation has been stuck in my head along with many questions. For one, if people are buying so much online—even construction products—how can I sell to e-buyers? Who are they exactly?

The Fifth Buyer

In 2008, Reed Holden and Mark Burton published Pricing With Confidence: 10 Ways To Stop Leaving Money On The Table. It’s a “must-read” for any sales professional, and it defines four types of buyers:

  1. Price Buyers
  2. Value Buyers
  3. Relationship Buyers
  4. Poker Players

As their titles indicate, each buyer behaves differently during the sales process, and determining which type of buyer you are selling to can lend itself to a successful negotiation.

After meeting with Michael Mintz, I began to wonder, “Where does the e-buyer fit in? How can you determine if price is the most important factor when you never actually speak to an e-buyer? How do you build a relationship with an e-buyer?”

So many questions started to form in my mind and I eventually came to the realization that e-buyers are in a category by themselves; they are the fifth type.

My realization leaves only one question unanswered: What defines an e-buyer? Before we answer this question, let’s look at some pretty staggering statistics.

The E-Commerce Boom in the U.S.

In a recent study conducted by Consumer Intelligence Research Partners (CIRP), Amazon Prime membership has increased from 40 million members at the end of 2014 to over 54 million members at the end of 2015.

CIRP news release 2016-01-25 - Chart 1, US Amazon Prime Members

54 million. At the end of 2015, the U.S. population was just under 322 million people. Amazon Prime membership is equivalent to 16.8% of the U.S. population.

CIRP’s study was published by the Motley Fool and outlines why Prime members are loyal - good prices and better value make the $99 annual membership fee a “self-fulfilling prophecy” when you factor in the free shipping that comes along with it.

In other words, Amazon is capturing all four buyer types in one buyer: the e-buyer. Eat your heart out, Sam Walton…

And Globally

If you think the Amazon Prime numbers are impressive, try processing the following: Alibaba, the Chinese counterpart to Amazon, was founded in 1999 and currently has 443 million usersAmazon, founded in 1995 has 300 million. Users do not necessarily equal buyers.

According to CNBC, Alibaba and Amazon combined have 423 million annual active buyers and about 80% of the e-commerce market share in China.

In addition to the above numbers that have consistently risen over the last five years, consider that Jack Ma and Jeff Bezos—the founders of Alibaba and Amazon, respectively—continue to push the envelope.

For instance, Bezos will soon be opening a supermarket in Seattle where Prime members will simply swipe their phone upon entry into the store and all products they pull from shelves will automatically be charged to their Prime account - no checkout lanes.

So, what does all of this mean? You might be asking yourself, “How can I sell to e-buyers?” Before I answer that question, back to the original question.

Defining the E-Buyer

The first (and most important) characteristic of an e-buyer is an obvious buying trait: he or she would prefer to not get into their car, drive to a store, walk around, stand in line, pay, walk back to their car, drive home, and lug their purchase(s) into the house.

Simply put, the e-buyer demands convenience and they’re willing to pay for it.

Jeff Bezos figured this simple formula out years ago and has perfected it. His company focuses on only one type of buyer — the e-buyer. It’s a fascinating phenomenon, and one that companies all over the world are now struggling to keep up with.

As far as demographics go, e-buyers are not defined by a certain age group, sex, race, or religion. They are everywhere. They are men and women, baby boomers, Gen-Xers, and millennials.

As far as what they are buying is concerned, think of this simple anecdote: If they can find it in an online search engine (Amazon), they’re buying it. And they buy all the time; “e-tailers” like Amazon, eBay, and Overstock never close and e-buyers love it.

e-buyers also fall into the same two categories that traditional “brick and mortar” buyers fall into—B2C (Business to Consumer), and B2B (Business to Business).

When I asked Michael Mintz why his business decided to dip its toes in the waters of e-commerce, he said, “I find Amazon and Google Express to be less than half the cost of most building supply vendors for many routine items. The delivery is a little more complicated, but I find the money that it saves my clients makes it worthwhile.”

Even in the B2B world, e-buying is a self-fulfilling prophecy. If Mintz can provide greater value to his clients (despite minor logistical headaches), it’s worth it.

Where E-Commerce Leaves Brick-and-Mortars

Some analysts, however, still feel strongly about the importance of physical shopping and, ultimately, buying.

Morningstar stock analyst Edward Mui was recently quoted in an article published by The Arizona Republic stating that the most successful shopping malls tend to be premier retail centers located in markets that cater to demographically attractive customers.

He went on to say, "Despite pressure from e-commerce's effect on a changing retail landscape, we think physical brick-and-mortar stores will continue to have a relevant and critical role."

In another article, it was reported that “…disposable income spent by U.S. consumers in stores will reach $5 trillion by 2020…and 85% of consumers say they prefer to shop in physical stores…”

While the articles cited above are reassuring for buyers who do not want to see their malls and retail centers fall by the wayside, it is still intriguing to hear that Jeff Bezos does not share the number of members who subscribe to Amazon Prime each year. In a recent interview with Charlie Rose, Rose attempted to get confirmation that the number is now over 65 million, which would indicate a growth rate of over 20% from the results of the CIRP study.

So, while spending projections for the year 2020 are just projections, the Bezos behemoth will continue to keep people guessing at the real numbers tied to their membership.

Quipped Rose during the interview, "It’s a lot…" That much, Bezos did confirm.

What Retailers and E-Tailers Need to Do

At the end of the day, we as buyers are all unique and each buying experience we have is unique. The chess game being played by “e-tailers” and retailers could ultimately end in a stalemate with each side ceding a certain share of the buyer market to the other.

It’s a nice thought, but one that I do not think will come to fruition.

As demographics constantly change, the number of buyers will forever be evolving in each space. The key is for both sides to constantly pursue perfection of the buying experience for the buyer.

Unfortunately, for both buyers and sellers alike, neither side has a crystal ball and so we will all continue to engage in the time-tested tradition of simply going shopping. Whether it’s for shoes or construction products, how and where you choose to shop - that’s up to you.

I just hope you find what you’re looking for.

Stay Informed on Trends and Innovative Building Solutions

Learn more about the effect e-commerce, online shopping, demographics, and other factors are having on construction. Check out our slideshow on the U.S. Construction Industry and Influencing Factors.

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