As of today, Packaged Facts estimates that Amazon makes up ~43% of all U.S. e-commerce sales, which is dramatically higher than its ~28% share just four years ago. Continuing its growth trajectory, by 2022 Amazon is expected to make up nearly half of all U.S. e-commerce sales.
That degree of concentration will make it bigger than Walmart — even considering the latter’s huge brick-and-mortar presence which Amazon lacks.
Of course, Walmart continues to possess additional advantages that Amazon cannot match, despite the latter’s acquisition of supermarket chain Whole Foods in 2017. Not only does Walmart have a huge physical footprint in retail, it also offers a wide range of in-store services which entice foot traffic — things like an onsite pharmacy, financial services, and photo processing.
Also working in Walmart’s favor is its dominance in so-called “click-and-collect” shopping orders. According to recent surveys, ~43% of respondents identified Walmart as the pickup location for their last click-and-collect order — three times the share percentage of runner-up Target.
Still, the emergence of Amazon atop the retail industry heap says volumes about the seismic shifts brought about by online retail. The channel hasn’t been around all that long in the grand scheme of things, but its impact has been nothing short of seismic.
How have your shopping habits changed during this time? Do they reflect what has happened in the larger market? Please share your thoughts with other readers here.
Who’s surprised? It seems as though this retail dinosaur has been on its last legs for years now. Even when Sears merged with Kmart in the early 2000s, I recall one of my business colleagues remarking that it was “one dog of a company buying another dog of a company to create this really big bowser enterprise.”
“Most. Useless. Merger. Ever.” was how another person I know described it.
Indeed, it seems as though Sears’ biggest contributor to its financial bottom-line in recent years has been its real estate holdings. Sales of Sears commercial properties have contributed mightily to the company’s balance sheet, while retail sales seem almost like an afterthought.
“Old school” department store firms such as Macys and Kohls do significantly worse, typically taking between 3% and 4% of clicks apiece.
But Sears has been a poor performer compared even to the weak showing of traditional department stores; Adthena reports that Sears accounts for just 0.7% of online retail clicks.
To add the final nail in the coffin, anyone looking closely at what’s been happening with Sears’ print and online display advertising expenditures can see that the company was busily rearranging the deck chairs on the Titanic. Media measurement firm Statista reports that Sears/Kmart decreased the dollar amount it spent on such advertising from ~$1.5 billion in 2013 to just ~$415 million in 2017. That’s more than a 70% drop during a period of economic recovery.
When the numbers between market growth and advertising decline cross like that, you know exactly where things are headed …
Will Sears or Kmart even be brand names in another decade? It’s difficult to see how.
When it comes to online retailing in the United States, Amazon’s been cleaning up for years. And now we have new data from comScore that reveals that Amazon is as dominant online today as it’s ever been.
This chart illustrates it well:
The chart shows that when comparing actual time spent by Americans at each of the Top 10 online retailers, Amazon attracts more viewing time than the other nine entities combined.
Even when considering only mobile minutes, where so much of the growth is happening for digital retailers, Amazon’s mobile viewing time exceeds the combined total digital traffic across eBay, Walmart, Wish, Kohl’s and Etsy.
Pertaining to the mobile sphere, there is an interesting twist that comScore has found in consumer behavior. It turns out, there’s a considerable disparity between the amount of time spent with mobile compared to its share of dollars spent – to the tune of a 40% gap:
In essence, the data show that whereas mobile represents nearly two-thirds of the time spent with online retail, it accounts for only one-fourth of the dollars spent on goods and services.
But this difference is easy to explain: As the largest player in the field, Amazon fulfills a role similar to what Expedia or Trivago do in the travel industry.
Amazon gives consumers a way to scan the marketplace not only for product details but also for prevailing prices, giving them a sense of the expected price ranges for products or services — even if they ultimately choose to purchase elsewhere.
If there was any doubt that we’re in the midst of fundamental changes in consumer buying behaviors, the results from the opening days of the 2017 holiday season have put such questions to rest.
Movable Ink, a firm that enables content personalization within e-mails, has just published some insightful statistics it compiled from Thanksgiving weekend last month. Movable Ink logged nearly 438 million e-mail opens between the Wednesday before Thanksgiving and the following Cyber Monday. What did it find?
To start with, it found that recipients engaged with them.
Of the e-mails sent on Black Friday, nearly 50% achieved read lengths of at least 15 seconds. On Cyber Monday, the results were nearly the same (~46%).
Fifteen seconds may not seem like a long time to engage with an e-mail, but it’s light years compared to what is often experienced in consumer e-retail.
Movable Ink also found that the majority of the e-mails were opened on smartphones — far outstripping desktops and tablets:
Smartphones: ~53% of e-mail opens
Desktop computers: ~25%
Tablet opens: ~16%
An equal 53% of conversion actions happened on smartphones … but desktop conversions proved to be higher than their open stats, and e-mails opened on tablets were much less likely to experience conversions:
Smartphone: ~53% of e-mail conversions
Desktop computers: ~38%
Consumers were certainly in a buying mood over the holiday weekend, with purchases averaging between $120 and $140 on each of the four days of the long weekend:
Black Friday: An average of $124 spent
Cyber Monday: $141
However, while smartphones led in terms of e-mail engagement, when it comes to actual dollar sales smartphones come in last – by a country mile:
Desktop computers: ~$162 average holiday weekend total spend
We can acknowledge that smartphones have become the most important method for reaching consumers with product content, coupons and special offers. And yet, significantly more purchasing continues to happen on desktops.
One takeaway is that for all of the convenience smartphones purport to provide, the purchasing experience on mobile devices doesn’t yet match the experience on desktop computers.
It would also help if there was more similarity between the purchasing process sellers are delivering across all platforms. That continues to be a missing ingredient with some sellers, and it’s likely explaining at least some of the dampening effect on mobile sales revenues.
What’s in store for retail? Maybe not much at all …
There have been quite a few news reports about store closings since the beginning of this year — many of them focused on big brands like Kmart, JCPenney and Abercrombie & Fitch.
But what about the retail industry as a whole?
Recently, GetApp conducted research among a more general group of U.S. retailers that run online retail operations as well as a physical stores.
Among this group of respondents, two out of three believe that they could be closing their physical stores within the coming decade and operating their business solely online:
Extremely likely to be running my business solely online by 2027: ~23%
Not sure: ~17%
Extremely unlikely: ~4%
If these figures turn out to be even somewhat accurate, the “retail apocalypse” some news organizations are talking about will have become even more of a reality than even the most hyperventilating journalists are predicting.
It certainly lends additional credibility to current narrative about the downward slide of shopping malls across the United States …
I doubt I know a single person under the age of 75 who hasn’t purchased at least one item of merchandise from Amazon over the years. And I know quite a few people whose only shopping experience for the holidays is a date with the Amazon website.
Still, some of the breathless stories and statistics that are put forward about Amazon and its business model seem almost too impressive to be true.
I’m not just talking about news reports of drone deliveries (a whole lot of “hat” and far less “cattle” there) or the idea that fully-robotic warehouses are just around the corner – although these stories do make for attention-grabbing headlines. (Despite the continued need for human involvement, the way that robots are being used inside Amazon warehouses is still quite impressive.)
Moreover, a study published recently by BloomReach based on a survey of ~2,200 U.S. online consumers finds that Amazon is involved in most online shopping excursions, with nine out of ten online shoppers reporting that they check Amazon’s site even if they end up finding the product they want via another e-commerce resource.
More than half of the BloomReach survey respondents reports that they check on the Amazon site first — which is a new high for the company.
But are all of the reports about Amazon as credible?
Recently Doug Garnett, CEO of advertising agency Atomic Direct, penned a piece that was published in the December 2016 edition of Response Magazine. In it, he threw a dose of cold-water reality on some of the narratives surrounding Amazon and its business accomplishments.
Here are several of them that seem to contradict some of the commonly held perceptions:
“Amazon is a $100 billion retailer.”
Garnett notes that once subtracting Amazon’s non-retail revenue for 2015 (the last year for which financial data is available), the worldwide figure is more like half of that.
In the United States, Amazon’s retail sales are closer to $25 billion, which means it makes up approximately 6% of total retail sales.
That’s still very significant, but it isn’t the dominating presence as it might seem from all of the press hype.
“Amazon is profitable now.”
Yes, it is – and that’s after many years when the company wasn’t. However, approximately three-fourths of Amazon’s profits are due to selling cloud-based services, and the vast majority of the remaining profit dollars come from content delivery such as e-books plus music and video downloads. So traditional retail hard-goods still aren’t generating profits for Amazon.
It turns out, just as retailers like Wal-Mart, Target and K-Mart have discovered, that replicating a retail store online is almost always a money-losing proposition.
To underscore this point, Garnett references this example of a merchandising campaign in 2016 as typical:
“When one unit was sold on Amazon, eight were sold at the retailer’s website and 80 were sold in the brick-and-mortar stores. The profit is in the store.
For mass-market products, brick-and-mortar still dominates. Amazon is a nice incremental revenue stream, [but] not a valid alternative when you’re playing in the big game.”
It also means that companies that are looking to Amazon as a way to push their products into the marketplace should probably think twice.
At the very least, they should keep their expectations realistically modest.
America’s department store chains – and anchor stores at countless shopping malls across the country – are reporting another rounds of disappointing sales and profit figures following the 2016 holiday season.
It underscores what we’ve been seeing all over the country – dead or dying malls.
In fact, retail industry analyst Jan Rogers Kniffen predicts that about one-third of malls in the United States will shut their doors in the coming years.
That’s about 400 of the ~1,100 enclosed malls.
Equally startling, of the ~700 that remain, all but around 250 are expected to continue to struggle.
The problem is multi-faceted. At an estimated 48 sq. ft. of retail space for every man, woman and child in America, that’s a footprint that gotten too big.
“On an apples-to-apples basis, we have twice as much per-capita retail space than any other place in the world,” Kniffen says, adding that the United States is “the most over-stored” country anywhere.
The oversupply of retail space is challenged by changing customer tastes, too. Online shopping is a huge problem for malls, as is the rising popularity of off-price stores in lieu of the department stores like Macy’s and Penneys that have served as important anchors for mall properties all over the country.
Now we hear reports that Macy’s is planning to close numerous store locations during 2017, joining Sears and Penneys which have been doing the same thing over the past several years.
Entertainment – Even in the age of “interactive everything,” consumers – particularly younger ones – continue to seek out gathering places and “experiences.” It’s one reason why some shopping malls have had to deal with large numbers of young people flooding their spaces – not always with pleasant results. Malls seeking out tenants that provide entertainment hubs — such as theme parks and gaming parlors, edutainment, and even virtual-reality content and immersive experiences — will be able to draw customers from a wider geographic area who crave social interaction.
Food and drink – “Food is the new fashion,” some people like to say. Successful malls are getting in on that action, incorporating popular dining options along with unique ones as a way of becoming destination locations.
Retail – Still a core aspect of malls, but with new twists, such as creating retail centers that are also learning zones that bring together consumers, retailers and entertainment. McKinsey uses the example of a sporting goods store that also includes a fitness studio, or offline showrooms for online retail players. More reconfigurable spaces that can be used for pop-up stores, special product launches and seasonal offerings are also options with potential.
Transportation – Getting to and from mall properties with ease is growing in importance, and where some creative thinking might go a way towards making some malls more attractive than others.
Technology – The more that malls can create a “seamless chain” between online and on-site shopping, the better their chances are for staying relevant in the new retail environment. McKinsey posits a number of initiatives, such as creating “virtu-real” formats that provide consumers with a more interactive retail experience through the use of touchscreen navigation portals, virtual fitting rooms, allowing smartphones for e-checkouts, and click-and-collect services to help blend the offline and online shopping experience.
In sum, for shopping malls it means fundamentally rethinking their role — and then adapting their strengths to those of the virtual/interactive world.
If we check back in another five years or so, we should have a pretty good idea which tactics have been successful – and which mall properties, too.
Hopefully, the shopping mall closest to your home won’t look like the one at the top of this article.
I’m old enough to remember – as an adult! — Maryland’s infamous “blue laws,” which mandated that practically no retail establishments could be open for business on Sundays. It was a way for retail employees to have a day off with their families, even if other consumers wanted to do their shopping on the weekends.
The state saw itself as the protector of those workers against “exploitation” by retail establishments out to maximize their sales and profits.
There were exceptions to the law, of course – such as restaurants and grocery stores which were allowed to be open. But for the most part, strip malls and other retail zones were eerily quiet on Sundays.
Eventually, public pressure for the convenience of weekend shopping became too intense, and the state legislature finally abolished the antiquated restrictions in the 1980s.
It seems the same kind of dynamics are at play these days in the world of e-commerce — not by intent but by end-result. A just-released analysis by e-mail services provider Yesmail reveals that e-mails sent on Saturdays generate more than 60% better conversion rates than the average. On Sunday, it’s 40% higher-than-average sales.
Those findings come from an analysis of more than 7 billion e-mails deployed over Yesmail’s platform during the second quarter of 2016.
Clearly, shopping habits are similar whether it’s electronic or physical. But interestingly, it is e-mails sent on Thursdays that generate the highest engagement levels (open rates and clickthrough rates). It seems that consumers respond well to an initial e-mail sent on a Thursday, with a follow-up communication over the weekend to cement the sale.
Just as the physical retail stores were losing out on a good deal of business on Sundays, e-commerce firms may well be leaving money on the table today – simply because their employees’ work schedules — weekdays — don’t conform neatly to when so much of the shopping action is taking place with consumers.
Sending e-mail messages during the weekend, when work e-mails slow down, offers marketers the opportunity to stand out from a crowded inbox. But that isn’t happening as much as one might expect. Chad White, a research director at Litmus Software, notes this:
“Most B-to-C promotional e-mails are sent Monday through Friday because that’s when corporate offices are open. It’s certainly not because consumers aren’t in their inboxes over the weekend — because they are … which makes sense because consumers are less busy over the weekend and tend to do an outsized proportion of their shopping then.”
Just as the pattern has been for the past three or four decades, really.
That’s what makes the activities of some retailers in the online arena so curious. There are all sorts of ways for business enterprises to plan and schedule e-deployments at a prescribed date or time. The weekend calendar and when marketers are or are not working really shouldn’t any sort of impediment. Funny how something as simple as that fails to make it into the mix sometimes …
With online shopping so popular these days, why are consumers electing to pick up the merchandise they’ve ordered at the store?
While it isn’t a pervasive practice, a study published recently by consumer analytics firm Connexity/Bizrate Insights finds that more than 30% of online shoppers have used in-store pick-up at least once during the past 12 months.
Even more surprising, perhaps, is that ~13% of respondents reported that they had considered abandoning a purchase because in-store pick-up wasn’t offered as an option.
As it turns out, people choose the in-store pick-up option for four major reasons:
To avoid paying shipping charges: ~55% cited
For the convenience: ~43%
Need to receive the order quickly: ~36%
Shopping online to ensure the item is available: ~29%
At first blush, I wouldn’t think that “convenience” means having to drive to a store versus having the product delivered right to the house. But perhaps “convenience” in this sense is related to product availability – avoiding a fruitless trip to the store only to find out after-the-fact that the desired product isn’t in stock.
But the other reasons cited make good sense, too. Everyone understands the desire to save money – if not on the product itself, then by avoiding shipping charges. And if a quick drive to the store gets you the items compared to waiting a few days for the shipment to arrive, that’s understandable as well.
The Connexity findings underscore how important it is for retailers to align their e-commerce setups to allow for in-store pick-up – especially if the economics don’t allow them to offer a free shipping option. There’s simply too much competition from online-only retailers to afford losing sale to them based on any of the four factors listed above.
When it comes to social media, it turns out that the major U.S. retail brands are a lot better at dishing it out than consuming it.
On the “dishing out” side of the ledger, these retailers have been posting an ever-increasing number of social messages aimed at their target audiences.
A recent report from Sprout Social Index titled Snubbed on Social shows just how much: In the 3rd Quarter of 2014, the average number of messages deployed by the typical major retailer was around 150, but in the 3rd Quarter of 2015, the number had grown to in excess of 350.
But what happens when these retailers are on the receiving end of social messages? Sprout Social has determined that the typical retailer receives around 1,500 inbound social messages over a busy quarter (such as during the holiday season).
Of these, approximately 40% of the messages are ones that warrant a response.
But only about 1 in 6 – fewer than 20% of them — actually get one.
And those consumers who are fortunate enough to receive a response are waiting approximately 12 hours to get it. That’s up from ~11 hours a year earlier.
One interesting factoid from the Sprout Social reporting is that customer messages on Twitter tend to get a better response from brands.
But it’s the difference between merely poor (~14% on Twitter) and downright embarrassing (~9% on Facebook).
Scott Brandt, chief marketing officer at Sprout Social, states it succinctly: “More often than not, brands are silent when their customers reach out.”
What are the implications of this (non-)behavior?
For one thing, interacting with customers helps drive more interesting and more purchases. Sprout reports that consumers are seven times more likely to respond to social promotions and other social news if they have had meaningful interaction with the brand.
Obviously, ignoring the social messages that come through isn’t the way to build that engagement.
One dynamic that appears to be at work is that brands continue to use social media as a vehicle for broadcast messaging, whereas many consumers view social platforms as the place for a more conversational, two-way level of engagement.
You know – just like social media is supposed to work.
But there are some seemingly intractable reasons why it’s difficult to put the “theory” of social interaction into “practice.”
For starters, there are so many ways for people to communicate with companies and brands today (versus only by letter, phone or in person not that many years ago), that too many businesses are either stretched to thin or simply don’t feel the need to respond urgently if at all.
Another issue is similarly personnel-related. For brands to respond better would mean hiring and training people who possess the authorization to actually do something about a question or concern. Low-level staff with low wages and benefits and with no authority to resolve issues is a clear ticket to nowhere.
At the very least, putting a process in place that provides a quick response to all inquiries – even if the initial response is auto-generated – is just plain common sense. The value to the consumer of a response that comes within just a few minutes – even if the message was posted in the dead of night – is what makes consumers bond with a brand. (Just having their existence validated is huge for some people.)
Contrast that to the other, more common experience of brands ignoring their consumers to death … and where people never forget which companies aren’t good at responding to their questions or concerns. Does anyone think that reputation doesn’t have a dampening effect on sales?