Massive numbers of people shop online, and more are joining in every day. The regular retail economy may be dragging its feet, but the momentum in online shopping shows no signs of slowing down anytime soon. Is this a sign that traditional shopping done in a store will go the way of the dodo?
The biggest factor is the convenience and ease of shopping online. It holds huge appeal to a large segment of the consumer market and with good reason. Who wouldn’t rather sit at their computer and order what they need with a few clicks instead of going from store to store, full of people who wish they were anywhere else? Online shopping may eventually corner the market, especially when it comes to large chain stores.
Nationwide growth patterns
Between 2011 and 2012, there was a growth of roughly 27% in mail order and online retail business, according to the U.S. Census Bureau. They used figures across 1,200 industries at thecounty, state, and national levels to assess data. By comparison, the growth in traditional stores is shocking at a nationwide level of only 0.1%!
It isn’t difficult to discern why there is such a large discrepancy between the two. Online retailers can reach anyone with an internet connection and efficiently ship products all over the world. Retail stores do not have that kind of power, and the playing field is far from level.
For example, if you live in a rural area of Kansas, by going online you can outfit yourself with a brand-new wardrobe without ever leaving your home. If you needed to get to an actual brick-and-mortar store, it could require you to drive several hours to locate what you need.
Employment growth in online retail
With more people shopping online, that means tons of employment opportunities are being created by online businesses. Again, using the period between 2001 and 2012, the Census Bureau provided data showing that growth in regular retail stores was stagnant at less than 1%, while there was a 13% increase in retail employment online.
Amazon, the world’s largest online retailer, employs more than 110,000 people throughout the globe. Very few traditional retailers can even come close to these numbers, except for stores like Walmart or Target.
The advantages of e-commerce
Along with the ease and convenience offered with online shopping, regardless of location, smartphones are a huge advantage to online retailers. With the growth in the tablet and smartphone market, greater numbers of people are online wherever they happen to be. You can pay your bills during the bus ride home from work or purchase a pair of shoes while you are standing in line at the county fair.
The expectation from experts in the industry is that online sales may take over the market within the next few years. The retail industry grows as e-commerce grows. Even though the growth is not as quick within the traditional stores, the fact that it is still growing is a wonderful sign the economy is continuing to recover. In 2013, more than $230 billion dollars in sales could be attributed to the retail e-commerce industry.
Holiday shopping online
We all know the frustration of rushing around to get shopping done for the holidays. Parking lots are packed, demented consumers frantically grab things, you can never find what you are looking for, people are downright grouchy, and the holiday spirit was lost months ago. Did I mention the music? Or the decorations?
Why in the world would you want to put yourself through something like that if you didn’t have to? Thanks to online options and e-commerce, the terrifying world of holiday shopping can easily be circumvented from your couch.
Besides being able to browse for things at your leisure, you are not limited to just what is on the shelves at your local store. You can shop anywhere in the world and find almost anything for everyone on your list with just a few clicks and a credit card.
The additional advantage to doing your holiday shopping online is the ability to have your purchases shipped directly to the recipient. This saves you from paying extra shipping charges for friends and family who live some distance away.
Most online retailers also offer the option of marking your purchase as a gift. This way, they will disguise the packaging and remove price tags. You can also often add a personalized message card with the delivery.
The trends driving traditional retail into the grave
Online shopping is winning the retail war, and there are four trends that explain exactly why.
1. Losing cost structure
When you purchase a product at a store like Macy’s, there is a good chance it has been marked up at least three different times. When the factory gives the item over to the brand, there is a markup. There is a second markup appears when the brand sells the item to Macy’s. The final markup occurs when you buy the product at the store.
The result is a price point at an astronomical multiple of the original cost of the item, anywhere from 2x to 5x. Brands operating online only sell directly to the customer, eliminating one markup level. By dealing with all the retail, curation, and design aspects in-house, they still realize huge profit margins, while still managing to undercut traditional competitors.
They also do not have the costs associated with a large staff and everything it takes to maintain a network of physical locations.
2. Free returns and free delivery
Shipping costs were a source of friction between consumers and online retailers. It seems unreasonable to ask a customer to order a product to save money, and then tack on unknown shipping charges. Having them pay for returns is not good business, either.
Zappos was one online retailer that figured out the way to retain customers was to offer them free shipping and free returns. This is now pretty much a standard policy for any e-commerce business operating at full price.
3. Voluntary conversion
The smartest retailers saw where the trend was heading in online shopping and did something about it. Macy’s operated for more than 150 years in the traditional way before opening their online shopping division. After their conversion, in-store sales grew by only 5.3% in 2011, while there was a 40% growth in online sales.
Nordstrom is also adapting to the new reality of online shopping. They offer free returns and shipping and are integrating their strategies for both in-store and online sales by rolling out modified POS systems. By doing away with long lines, customers are in and out of the store in a flash.
4. Set it and forget it
What it comes down to is that peopleare busy. For items used on a regular basis, it just makes sense to receive them on a set schedule. Of course, this doesn’t work for every product.
By signing up for monthly shipments, the company earns recurring revenue on the products they sell. Consumers love it because it is cost-effective and convenient, and businesses love that they are guaranteed income. Even Amazon offers scheduled delivery for certain categories of products.
Final thoughts
E-commerce is swiftly becoming the preferred choice of buyers when it comes to shopping, threatening the very existence of traditional retail stores. Since Amazon emerged in the late 1990s, they have grown to become one of the world’s largest retailers.
The online shopping culture is gaining global traction, and the U.S. is leading the race. Roughly 80% of all Americans have purchased at least one product online, meaning the rest of the world will catch up shortly.
Author Bio: Cory Levins serves as the Director of Business Development for Air Sea Containers. Cory oversees the development and implementation of ASC’s internal and external marketing program, driving revenue and profits from the Miami FL headquarters.
