The Realities of Ecommerce

Ecommerce is certainly an important part of retail, but it isn’t growing at the incredible numbers once envisioned a few years back. "E-Commerce continues to take a larger and larger share of the retail market over time, and now accounts for approximately 8 percent of the retail market -- on an apples-to-apples basis for categories that are sold both online and offline -- a percentage that has doubled in the past five years," said Andrew Lipsman, senior director, industry analysis at comScore. This doesn’t sound terribly exciting except for the ‘size’ in the revenue numbers- U.S. Internet sales were over $170 Billion last year and is expected to have 9- 10% compound annual growth through to 2015[1].

Another reality is the relatively small bucket of products and services that consumers are buying[2]. Books and clothing continue to top the list. Next on the list- airline tickets, followed by electronic equipment and hotel reservations. What is interesting, however, is how consumers use the Web for product and service reviews. For consumer electronics, 57% of on-line respondents consider reviews prior to buying followed by reviews on cars (45%) and software (37%) as important on-line influences when making a purchase. And online reviews are playing an increasingly important role in purchasing decisions; 57% of online respondents consider reviews prior to purchase. And 40% of participants said they would not even buy electronics without consulting online reviews beforehand.

Here are some other interesting ‘realities’:

· Google accounts for 80% of total traffic on ecommerce sites.

· Last year, on-line buying was particularly ‘hot’ with deals from Groupon, Social Living, etc. What will be interesting is how these ‘groups’ will differentiate their offerings and if companies will move off spa s, restaurants and food deals to other products- Group-Home Depot anyone?

· Social media continues to impact the market as an effective way to reach customers. Twitter is undeniably the most effective tool.

· Email marketing with personalization and visually appealing offers will be the norm to capture customers.

So, despite steady growth, e-commerce still accounts for a relatively small share of the overall retail market, and that's not likely to change significantly in the near term. For me though, when you talk ‘billions’, it’s certainly a viable means of selling product and service. "It needs time and education," said In-Stat analyst Jim McGregor. "Most people don't know that you can buy just about anything from Amazon, including car parts, office supplies, food and household items. This is the educational part."

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[1] eMarketer forecasts 9% and Forrester Research 10%

[2] 2010 Nielsen survey of more than 27,000 Internet users and their buying behaviours