Practical Ecommerce

Understanding the Shift to Online Shopping

Defying the general economic gloom, ecommerce sales have registered seven consecutive quarters of year-over-year revenue gains since Q4 2009, with some in double digits. The last three quarters (Q4 2010 through Q2 2011) showed gains of 11, 12, and 14 percent respectively, the best performances since Q2 of 2008, according to research firm comScore.

Figures calculated by the U.S. Department of Commerce are more generous, showing an increase of 17.2 percent for Q2 2011 over Q2 2010. In contrast, total retail sales — stores and online — for Q2 2011 increased only 8.4 percent over the same quarter in 2010. Ecommerce accounted for 4.2 percent of total retail sales in Q2 of 2011, according to the Department of Commerce.

The Numbers

While the government estimates Q2 ecommerce sales at $44.2 billion, comScore
estimates a more conservative $37.5 billion. Travel and ticket sales are not included in either comScore or Department of Commerce numbers.

The total number of individuals making purchases on the Internet rose from 147 million in Q2 2010 to 170 million in Q2 2011, an increase of 16 percent. The number of transactions increased from 440 million to 539 million in the same time period, an increase of 22 percent. However, the average order decreased from $75 to $70. Interestingly, according to comScore, those earning less than $50,000 per year have shown the greatest year-over-year increase in online shopping. In Q2 2011, their online spending surged 28 percent over the same time period last year. That compares with an increase of eight percent for those earning between $50,000 and $99,999. However, this demographic group comprises only 25 percent of ecommerce customers.

Why Consumers Shop Online

According to research from comScore, consumers are turning to the Internet to shop for the following reasons.

  • Price. They are comparison shopping and finding the best deals online.
  • Convenience. People want to be able to shop anytime.
  • Free shipping. More ecommerce vendors are offering free shipping, especially during holidays;
  • Late technology adopters are putting aside their concerns about security and are buying online;
  • Daily specials. New online shopping models such as daily deals and flash sales are generating excitement and impulse purchases;
  • Mobile benefits. The capability to comparison shop, research products, and purchase from smartphones and tablets gives ecommerce vendors another advantage over brick-and-mortar sellers. Even in bad economic times, people will still shop when they are bored.

An increasing number of people are saving money by shopping only when sellers provide discounts or coupons and — according to comScore — over 35 percent of shoppers regularly look for deals online. High income consumers – those earning over $100,000 a year – are more likely to comparison shop online, often with smartphones while in retail stores, and abandon an in-store buy for an Internet purchase.

What’s Selling Online?

The three product categories that showed the strongest year-over-year growth in the second quarter were event tickets, computers and peripherals, and consumer electronics. Apparel and accessories have shown growth this year while books have faltered. Unsurprisingly, ecommerce sales tend to peak in colder weather and when gasoline prices go up. comScore estimates that the ecommerce share of computer sales is now 37 percent and the percentage of consumer electronics is 30 percent. The top 25 ecommerce retailers account for over 66 percent of all online sales.

The Upcoming Holiday Season

Despite the ecommerce sales growth, this holiday season may be a tough one. Online comparison shopping site PriceGrabber conducted a winter holiday shopping survey, revealing that 45 percent of consumers intend to spend less money this winter holiday season than they did in 2010. Only seven percent plan to spend more this year. Graham Jones, general manager of PriceGrabber advised, “Our survey data found that shoppers are not only expecting to find great prices and bargains this holiday season, but 53 percent will start shopping earlier this year to spread out the impact of purchases, and 33 percent are beginning their holiday shopping in October.” Respondents also said that ecommerce vendors would have to offer price cuts, free shipping, and special sales to gain their business.

To take advantage of the shift to online sales, ecommerce sellers should ensure that consumers have an easy shopping experience whether it is from a desktop computer, laptop, smartphone, or tablet. For individuals not much interested in turkey or football, Thanksgiving is apparently a big shopping day — or at least a day to do research — and much of this will be conducted on smartphones and tablets this year.

The capability for consumers to use mobile phones to research and shop online while in brick-and-mortar stores creates one more advantage for Internet sellers with the right pricing and products. You can compete with retailers even when the customer is in their store.

Summary

Ecommerce sales are growing faster than brick-and mortar sales and this trend will likely continue. The one bump in the road might be the anticipated legislation that will require online-only sellers to collect sales tax, thereby eliminating some of the price advantage. I recently addressed this, in “Amazon Becomes a Proponent of Uniform Internet Sales Tax.”

Mobile shopping and marketing tools such as daily deals and flash sales provide ecommerce sellers new methods of enticing customers.

Marcia Kaplan

Marcia Kaplan

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  1. Shawn Kalin October 7, 2011 Reply

    the big problem is margins. and the too stores are nearly as tough on as offline.

    I well, the consumer wins.

  2. Kareen Hill October 10, 2011 Reply

    you didn’t mention a few additional helpful component, like social shopping, which is one of the most contributing aspect to online shopping. there’s no doubt that an easy checkout is important but if the company doesn’t allow their users to share items, or any other information they are doing a huge mistake!
    you can take Zizio as an example of a company that helps eCommerce sites keep connected to their shoppers and browsers.
    a company can’t afford not to have some social means
    https://www.facebook.com/ZizioGroupSale
    http://www.zizio.com/product