Evolving Customer Expectations are Driving Ecommerce Growth

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Ecommerce Sales vs. Department Store SalesEcommerce is outpacing offline retail like never before

Ecommerce has been growing at a relentless pace around the world seeing double digit growth annually since its dawn in the mid-nineties. And we have all the indicators that this trend is likely to continue in the coming decades. Especially the last few years the Ecommerce industry has been witnessing a steady upward shift.  The report from the Commerce Department for the Q1 2019 shows a new milestone for online shopping. E-commerce Sales as a Percent of Total Quarterly Retail Sales has breached the 10% mark.  It now stands at 10.2% of the total retail sales. This is kind of a first.

The Census Bureau of the Department of Commerce announced on May 17th 2019 that the estimate of U.S. retail e-commerce sales for the first quarter of 2019 was $137.7 billion, an increase of 3.6 percent (±0.7%) from the fourth quarter of 2018.  Total retail sales for the first quarter of 2019 were estimated at $1,344.9 billion, virtually unchanged (±0.2%)* from the fourth quarter of 2018.  The first quarter 2019 e-commerce estimate increased 12.4 percent (±1.1%) from the first quarter of 2018 while total retail sales increased 2.7 percent (±0.4%) in the same period.

The online commerce has been steadily and slowly eating up market share of the retail commerce in the past two decades.

Let’s look at some data points that point to the growing influence of Ecommerce and the decline of retail sales in other words both growing in quite the opposite direction.

The Growth of Ecommerce Infographic

Why is Ecommerce on the rise globally?

There are many enablers for the rise of Ecommerce globally. These are the primary drivers.

1) Consumerization of Technology – More people have access to internet than ever before and when it comes to smartphones it’s omnipresent. For example in China 80% users of internet are smartphone only users. Other factors that are enabling increasing internet usage are increased availability, ever-decreasing costs, and better bandwidth.

2) Price Advantage – Disintermediation, lower overhead and lower taxes have all played roles in driving down prices online. And when you are an online only store then your overheads are even lower. Also there is availability of secondary market (peer to peer) which allows people to buy new and used goods at lower prices in a marketplace-like environment.

3) Convenience – One of the biggest factors driving growth is the convenience. The costs to customers of shopping in a traditional retail store are significant, these include time away from home or work, transportation costs, including fuel for your car or public transportation costs. Compare this to shop online which costs almost nothing and only takes a few seconds to purchase a product.

4) Better Choice – The very nature of virtual store allows them to have a large assortment of products although that may not be the case always. For a retail store its very capital and labor intensive to sell wide range of products in physical stores. It involves procurement, physical possession of products, getting them to each store and continuous management of inventory. More over Ecommerce players have the advantage of drop shipping and centrally located warehouses. Ultimately all this translates into better choices for customers.

5) Closer Offline Tie Ups – While we have discussed the advantages of Ecommerce there are many disadvantages too. Primary one being inability to see and try the product and shipping. This is where the Ecommerce players with physical stores have some advantage over Ecommerce only vendors. This acts as a beautiful tool to bridge the gap between virtual and real world while also helping on many other fronts like returns.

How to connect with customers in the Ecommerce-first reality

A recent Harvard Business Review study across 46,000 shoppers had a very interesting insight. Apparently:

– 7% shopped online exclusively

– 20% were store-only shoppers

– 73% used multiple channel

Another study done by Business Insider revealed that shoppers who engaged on multiple channels are more likely to purchase more often. Welcome to the omni-channel world. Here’s how you go about crafting your omni-channel strategy.

1) Research Where Your Customers Hang Out – the first step involves finding out what platform, devices and mediums your customers use frequently. This includes both the virtual as well as real world. Understand what really motivates their lives. This is likely to give you additional insight into where to put your dollars.

2) Make Every Touchpoint Count – In other words make every Touchpoint shop-able. A customer should be able to make a transaction on all the channels. If they add some item from the website, it should show up on their mobile too and vice versa. This will also have a direct impact on your revenue and result in decrease of lost sales opportunities.

3) Converge Online Offline – In today’s world the consumers want to connect with your brand both online and offline before making a final purchase decision. In fact many of them use the apps while inside the store to access deals and coupons. Research has shown that such Omni-channel integration gives 3X return on investment and provides a seamless offline online experience to the user.

Final Thoughts

While Ecommerce will continue to crush retail as a whole for some time, the war is not between offline versus online, in fact it has never been about that. It’s always been about putting the customer right in the center of everything and being able to appreciate the interplay between the physical and virtual worlds. Future belongs to the players who appreciate this well and navigate through that.

 

McFadyen Digital has helped some of the world’s largest brands deliver innovative Ecommerce and online marketplace solutions to their customers for over the past thirty years. Please contact us at info@mcfadyen.com if you’d like to have a conversation about taking your own digital commerce experience to the next level.

 

 

 

 

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