Q2 2011 ecommerce sales were estimated at $37.5 billion (excluding auctions, autos, and large corporate purchases), an increase of 14% year over year. Ecommerce sales over the past decade were strong from 2002-2007 (roughly 20% comps on average), but slowed considerably from 2008-2010 as the economic crisis took its toll (dollar sales were +7%, -2%, and +9% over that three year period); today, it appears to be accelerating again, with low double digit growth in 2011 and through the first half of 2012. In comparison to overall retail sales growth, it is clear that ecommerce continues to take share, as has been the case for years (currently accounts for nearly 10% of discretionary consumer spending in the United States; roughly 9% of that spend comes from mobile/tablets); this data is consistent across a diverse group of consumers, with all income levels showing double digit growth over 2011.
Comscore ranks sales growth as either “very strong” (15% plus YOY) or “strong” (10-14%) across product category, in order of the percentage increase versus the prior year (meaning that Digital Content & Subscriptions reported the strongest YOY increase); here’s the breakdown:
Very strong – Digital Content & Subscriptions, Consumer Electronics (ex PC Peripherals), Flowers, Greetings & Misc. Gifts, Computers/Peripherals/PDA’s, Apparel & Accessories, and Event Tickets.
Strong – Consumer Packaged Goods, Jewelry & Watches, Home & Garden, Books & Magazines, Sport & Fitness, Office Supplies, Video Games, Consoles & Accessories, and Furniture, Appliances & Equipment.
Based upon the number of people visiting the retailer websites, Amazon (AMZN) is the clear leader with roughly 100 million unique visitors per month in Q2 2012 (7% increase from Q2 2011); while far behind, a noticeable follower is Wal-Mart (WMT), which saw a 23% year over year increase in monthly visits at 41.4 million in Q2 (nearly twice as much traffic as Target).
Comscore presents some data that is highly useful for teasing out Amazon’s domination of certain categories; in their slide deck discussing ecommerce results in Q2, they have a chart that shows category share as a percentage of Amazon’s overall sales in comparison to that category’s share of the overall retail e-commerce market – for example, they estimate that AMZN’s Computers/Peripherals/PDA share is in line with the index, or that the category (for Amazon) is comparable to the categories share of overall retail ecommerce (on a scale of 1-5, it’s in the middle at three; one would indicate under representation at Amazon, while a five would indicate that Amazon is particularly strong in that category).
Looking at the data, three categories fall in the upper end of the spectrum (Amazon is dominant): these are Consumer Electronics (ex PC Peripherals), Books & Magazines, and Toys & Hobbies, with the most noteworthy brick and mortar companies in those categories being Barnes & Noble (BKS) and Best Buy.
At the other end of the spectrum, we have companies that are under-indexed to Amazon’s overall share, meaning that they’ve held up relatively well (in comparison to other retail categories) to the threat of Amazon; the categories at this end of the spectrum are Apparels & Accessories and Office Supplies, which bodes well for a company like Staples.
There’s some other interesting data to come out of Comscore’s survey; one example is the importance of free shipping. From their research, 55% of consumers said that if they got to the end of an e-commerce transaction and they were not offered free shipping, they would cancel their purchase at that retailer. In addition, they noted that 95% of consumers would choose free shipping over free in-store pick if given the choice; however, if forced to pay for shipping, more than 60% would choose free in store pick-up as an alternative.
I find this interesting because (in my view) free shipping is unsustainable, particularly on overnight/two day shipping when online items are priced at or lower than retail. As consumers are forced to either increase ticket or pay for shipping, free in-store pickup becomes an attractive alternative, one that brick and mortar retailers hold over pure online competitors like Amazon; to be clear, I’m not suggesting the impact will be substantial – but I think it’s something to be cognizant of, particularly when you look net shipping costs (as a % of net sales) of nearly 5% at AMZN, a figure that’s expected to increase as customers use shipping offers at an increasing rate (and could shrink their already low 2% operating margin through the first six months of 2012).
I’ll tie some of this back into the Best Buy / Staples comparison article that I’ll publish soon (in addition to further analysis on the state of free shipping and sales tax and the impact those two items have on ecommerce), but I thought this would be a useful starting point; the divergence between these two industries in terms of Amazon’s penetration is only one of the reasons why the comparison is unjustified.