Is online selling gaining more momentum?
E-commerce by all indications delivered another strong holiday selling season in 2014, marked by solid double-digit growth. At the same time, a new report shows brick & mortar suffered a steep decline over the same period.
Online sellers spread buys across the period with aggressive targeted promotions both after and well before Black Friday weekend. Increased usage of mobile devices, whether tablets or smartphones, also helped. Omnichannel efforts by traditional brick & mortars also likely boosted online purchases.
According to comScore, U.S. e-commerce spending from desktop computers during November/December grew 15 percent year-over-year, slightly ahead of expectations. The gain exceeded 2013’s holiday increase of 10 percent and 2012’s gain of 14 percent.
ComScore noted that the results came despite a shortened holiday calendar between Thanksgiving and Christmas and after "erroneous reports of flagging holiday sales."
In another bullish report, the IBM Digital Analytics Benchmark showed that overall November/December online sales — including mobile sales — were up 13.9 percent. Mobile sales accounted for 22.6 percent of all online sales for the season and increased 27.2 percent year-over-year.
Other findings in the IBM report:
- Ther average order value was $119.33, down eight percent over 2013, with shoppers purchasing an average of four items per order. The average order value spent while shopping on PCs was $125.12 compared to $104.82 on mobile devices;
- Mobile accounted for 45 percent of online traffic for the holiday season, an increase of 25.5 percent year-over-year;
- Desktop PC traffic represented 54.8 percent of online traffic and 77.3 percent of online sales. Smartphones drove 31.2 percent of online traffic and 9.1 percent of sales. Tablets accounted for 13.4 percent of both online traffic and online sales.
The positive online results came as RetailNext, which specializes in retail analytics for physical stores, on Thursday reported a 6.5 percent year-over-year decrease in sales on a 7.1 percent decline in traffic at brick-and-mortar stores for the month of December. The firm previously reported an 11 percent decrease in U.S. store sales on an 11.4 percent decline in store traffic for November.
"Early-November and late-December had the most positive results for retail stores," said Shelley Kohan, RetailNext’s VP of retail consulting, in a statement. "While digital stole the show in between and captivated shoppers with aggressive promotional strategies, retailers who were able to effectively converge digital and physical channels to encapsulate the entire period will show the most positive results for the holiday season."
- Cyber Monday Ranks as Heaviest Spending Day of the Season for 5th Consecutive Year (2014) – comScore
- 2013 Holiday Season U.S. Desktop E-Commerce Spending Reaches Record $46.5 Billion, Up 10 Percent vs. Year Ago (2013) – comScore
- Weekly Online Holiday Retail Sales (2012) – comScore
- Overall holiday online sales up 13.9 for the 2014 season – IBM
- Black Friday creeps back towards Halloween – RetailWire
- Retail Stores Record Single-Digit Declines in Sales and Traffic Among Mixed December Results – RetailNext
- ‘Holiday Creep’ Not Sole Cause as Black Friday Malaise Mirrors Entire Month’s Results – RetailNext
Discussion Questions
Did aggressive online promotions, mobile activity, omnichannel initiatives or some other factor do the most to support online’s performance this past holiday season? Do you expect to see continued double-digit holiday gains for e-commerce in the years ahead?
Online sales increases in the 15 percent range, and brick-and-mortar declines of 7 percent, don’t really add up to the kinds of early numbers that retailers like J.C. Penney and Macy’s have reported (in the +3-4 percent range). The brick-and-mortar sales number is still much bigger than the e-commerce number, so I’d be cautious about connecting the dots between data points until more retailers actually provide some flavor on this issue.
But is e-commerce continuing to grow at a faster pace? Absolutely, and many of the strategic initiatives announced yesterday by Macy’s are reflective of these changes. The retailers who figure out “omni-channel” and adapt their business model accordingly—like Macy’s—will continue to gain market share in the near term and the long run.
All of these factors contributed. However, what is missing is the misplaced hope that pure brick-and-mortar will regain its place in the world of retailing. It really is “game over” unless retailers develop an omni-channel approach. Keeping in mind that omni-channel is about customers, not channels. Technology provides consumers with perfect information, price transparency and the ultimate convenience. In addition, online retailers have addressed many of the logistics issues that plagued the 2013 holiday shopping season.
It is “game on” for e-commerce going forward. This shopping paradigm shift has sent everyone back to zero, particularly traditional retailers.
The numbers cited in the article, while nuanced, do support the general trends in retailing. Online sales are growing and overall, brick-and-mortar sales during the holidays are generally flat or declining.
This trend is logically going to continue in the near term due to more Millennials, (who have high propensities for online shopping), entering the market. Other factors such as increased e-commerce options, better deals and the growing comfort all shoppers are experiencing with buying online, make double digit e-commerce growth in the next few years highly likely.
Today’s omni-channel consumer votes based on a multi-faceted value proposition, which has a context that varies in a selling season.
In peak promotional periods, with items that are well known (commodity like), e-commerce has the edge on price, promotion and selection—not to mention convenience of delivery to your home.
For items that are personal, considered purchases, consumers find value in shopping stores and meeting with staff face-to-face. This is particularly true if the item is tied to a service or may involve a potential return.
Where the double-digit holiday gains for e-commerce are continues to depend in large part on whether stores create ways to provide consumers with value beyond product at a price.
Why are we still so caught up in a discussion of online vs. in-store? The key takeaway is that it has become an omni-channel world, and if retailers want to compete they need to adopt this strategy. Consumers don’t differentiate. They want items to be in-stock and at a price point where they find value. Retail sales were up. Consumers are spending. That’s the important story. It really doesn’t matter if the gains came from in-store or online.
So let me get this right, retailers are investing more and more into online and traffic has gone down in their stores, chicken or egg?
While online growth continues to impress, there are a couple of things that need to be noted especially when discussing holiday trends.
Brick-and-mortar is still the big kahuna with the majority of retail sales: Over 90 percent.
The very nature of “gifting” lends itself to online shopping. Shoppers armed with friends and family wish lists that often include URLs of wanted items find it easy to fulfill the gift lists without the hassle of navigating crowded malls.
For those items purchased online, how many were returned? Apparel, especially, has an online return rate of over 50 percent for some retailers. Holiday gift giving makes returns even more of a factor for both channels because buying the right size and fit for someone else is nearly impossible.
So declaring a clear win for online over brick-and-mortar is naive. The best way to gauge the success or failure of a retailer over the holiday is to look at their total sales. The winners will have offered their customers value no matter when or how they chose to shop—online or in-store.
As these and other reports stated, the growth in mobile commerce is on fire. The convenience of this channel helps shoppers across the globe. The only potential wrinkle I see in the next 18 months is that I am seeing trends and reports on the need for Millennial “digital detox.” I’m not certain this will necessarily take place, however it will be interesting to see in the next two years if younger adults actually begin to talk to each other face-to-face, like we Boomers still do!
E-commerce will continue to grow at double-digit gains for the next few years simply because it’s a much smaller percentage, less than ten percent in the U.S., of overall retail sales, because of the convenience factor and because a significant percentage of brick-and-mortar retail stores are uninspiring. If I am going to get in my car, drive somewhere and battle the crowds, the experience had better be worth it.
The upside for brick-and-mortar retail is that it’s usually darkest before the dawn, so I am of the mindset that we are in the early stages of a massive overhaul, restructuring, etc., of the brick-and-mortar retail environment in conjunction with e-commerce and m-commerce. Those who think this isn’t necessary will be left behind while the ones who embrace this stand a much better chance of maintaining their relevancy.
It is the other factor: CONVENIENCE. As more and more people experience the convenience of online shopping, more and more people will return and buy more and more.
None of the above! With consumer confidence up related to online shopping, no need to try on or touch since it’s a gift already picked out on a wish list and convenience. Who’s going to get in a car and take on the hassles of in-store shopping?
It’s other times of year that in-store is more preferred. Like, say, back to school.
‘Nuff said for my 2 cents!
This is a case for constructive disruption, in that purchases are both increasing and shifting. Holiday sales should increase 4% based on NRF and RetailNext data. Behavior is shifting by time and channel.
Time shifting. Early November online promotions captured early season demand, depriving in-store sales. Then came the rebound. A long post-Christmas weekend grew in-store spend 8%, aided by lower gas prices.
Channel shifting. Online was strong across all weeks and all store categories. Mobile skyrocketed, especially smartphones, which accounted for 23% of online purchases.
Perhaps the most interesting of all is the implied mix of online sales that results in 4% overall growth. If +14% (IBM) in online sales can overcome -6.5% (RetailNext) in in-store sales, that implies online sales have grown to ~50% of retail sales. Those numbers don’t add up, perhaps due to different measurement periods and methods. It will be interesting to see upcoming NRF and Commerce Dept data to compare.
Yes. Yes.
I think another factor is the quality of design and improved relevant/targeted shopper experiences. That’s being driven by an evolution of devices, operating systems, software, infrastructure, shopper level data, and tools. Oh, and improved know-how relating to the design, testing and deployment of apps that simply “just work.” Perhaps an adapted version of the famous Yogi Berra quote applies: “Going to the store is so popular, no one goes there anymore.”
Steve Jobs early-on called the computer the bicycle for the mind. Since department stores and their multiple categories required building multistory formats, perhaps the Internet is the escalator for the shopping-impulse (and elevator operators should be retraining in JavaScript.)
It’s all so interesting.
Yes. Yes.
This is a case for constructive disruption, in that purchases are both increasing and shifting. Holiday sales are expected to increase 4%, based on NRF and RetailNext data. This is the out come of behavior shifting–by time and channel.
1. Time shifting. Early November online promotions captured early season demand, depriving in-store sales. Then came the rebound. A long post-Christmas weekend grew in-store spend 8%, aided by lower gas prices.
2. Channel shifting. Online was strong across all weeks and all store categories. Mobile skyrocketed, especially smartphones, which accounted for 23% of online purchases.
Perhaps the most interesting of all is the implied mix of online sales that results in 4% overall growth. If +14% (IBM) in online sales can overcome -6.5% (RetailNext) in in-store sales, that implies online sales have grown to ~50% of retail sales.
Those numbers don’t add up, perhaps due to different measurement periods and methods. It will be interesting to see upcoming NRF and Commerce Dept data to compare.
I think we need to stop obsessing with online versus offline retail figures at the macro level because the consumers aren’t. As a shopper I like going to a local target to pick up things just like I would buy things off Amazon.com prime, and I would continue to do both in the future. For any retailer, the key is total retail sales for online and offline, driven by brand awareness and fulfillment across all channels.
I think that a combination of the early and aggressive promotions, higher than ever mobile usage, and the omnichannel standard have all contributed to the double digit growth that online retailers enjoyed this past holiday season. I think retailers have a lot of work ahead of them if they want to sustain it. Maybe this will come in the form of an even longer holiday shopping season, mobile-only promotions, or wider adoption of free shipping for the holidays. 2014 was a big year for online retail and I’m certain that 2015 will continue to break records with continued innovation from all corners of the industry.
The store experience needs to be re-invented in order to survive. At the rate we’re going now, you could close half your stores—no matter who you are—by 2020 and actually increase your business.
Let’s hope most retailers get this in the same way that Starbucks does with their ‘Roaster’ stores—fantastic experiences of that magnitude will have to be the order of the day. “Stack it high and let it fly” is OVER.
Marge Laney brings things perfectly into alignment when she writes, “… declaring a clear win for online over brick-and-mortar is naive. The best way to gauge the success or failure of a retailer over the holiday is to look at their total sales. The winners will have offered their customers value no matter when or how they chose to shop online or in-store.”
And Kenneth Leung is on to something when he says, “stop obsessing with online versus offline retail figures at the macro level because the consumers aren’t.”
Let’s see, e-commerce sales up double digits and brick and mortar sales down single digits and the overall sales are up verses last year. Yet what is missing is brick and mortar sales are close to 10 times that of e-commerce.
Before one credits aggressive online promotions as the rationale, one has to look at the category sales. Were the total category sales better for online this year? It depends on what the consumers are buying each holiday season. I know our household spent more online than last year, but it was mostly for items not available in our area stores; the majority of purchases were with brick and mortar retailers.
Future years will see double digit sales from e-commerce for at least the next ten years, but it will be a long time before e-commerce sales equal brick and mortar sales.
These are all factors driving digital commerce, but there are others. One is the fact that retailers are having an easier time improving the digital experience than they are the in-store one. Especially for large retailers, it’s much more economical to invest in digital commerce than it is to transform the broader enterprise technology capabilities.
Another is that there are too many retailers selling the same goods. Commoditization is, by definition, the great equalizer and absent a differentiated (i.e., better) customer experience in-store, it’s not a surprise to see e-commerce is growing faster than in-store.
Finally, retail is increasingly an industry of haves and have-nots. There’s a growing list, including Wet Seal, who have no future in brick-and-mortar retail. Call it “natural retail selection” as Darwin’s principles certainly apply.
E-commerce is getting very popular nowadays! I have an ecommerce website and I get pretty good profit from it. I am also using eBuyersReviewed as an online protection tool.