E-commerce has been a buzzword in the industry for more than a decade. I have come across some interesting data points that paint a new picture of the e-commerce marketplace than one that has previously existed. Not surprisingly, this shift in e-commerce trends is being driven by mobile devices. The implications of mobile on e-commerce will be significant.
Take a look at the following chart depicting the past 11 years Q4 US e-commerce sales as a % of US retail.
As the chart above illustrates, Q4 2013 saw the biggest jump in e-commerce growth of any past Q4. According to the US Department of Commerce, 2013 online sales grew 12% over 2012. During the same time period overall retail growth in the US was up a less- than-anticipated 4.1%. According to a recent report from Monetate, in 2012, only one in five online purchases were made on a mobile device (phone and tablet). This year, that number jumped to one in three, growing approximately 50% in one year. In many of the ways the mobile web is poised to become more powerful and more dominant than the desktop web, so will mobile e-commerce be more powerful and more dominant than desktop e-commerce.
However, not all mobile platforms are made equally when it comes to e-commerce. To understand the future of e-commerce and mobile e-commerce we need to understand how platforms and form factor trends signal how this market will evolve. For the sake of this report we will focus on tablets and smartphones.
Compared to 2012, the tablet saw an increase in average order value (AOV) of 14.13%. This last holiday quarter in the US the tablet AOV was $162.80. AOVs on tablet map much more closely to that of a traditional PC. For comparison the tablets YoY increase in AOV was 15.71% with a total value of $167.31.
Similarly conversion rates of tablet purchases and PC purchases were similar as well. The tablet saw purchase conversion rates increase 17.75% YoY with a conversion rate of 3.16% in Q4 2013. The PC saw conversion rates jump 24.29% with a total of 4% of purchase converted.
Understanding that the tablet and the PC have similar average order values and similar conversions is a key takeaway. Why we are more optimist these trends will continue and the tablet may even continue to grow as a percentage of e-commerce transitions is due to its mobility over the PCs. More and more consumers are using their tablets while in key modes of discovery. Using a table to read a digital magazine in bed or on the couch, or using a tablet while watching TV are all situations where the consumer may see something they may be interested to purchase. The mobility of the tablet makes it the perfect form factor for not just gathering data but also for completing the transaction.
A joint research project between Ipsos and Google highlighted that the tablet was the device with the highest number of purchase conversions where the discovery process of something like shopping, planning a trip, and managing finances, were most commonly started and finished on the tablet. Where in the case of the smartphone most of the same tasks were started on the smartphone and completed on a device like a PC or a tablet.
While the traditional PC will still play a key role in the future of e-commerce, the tablet is the device with the most potential in not just western markets but global ones as well. I expect the tablet to soon be the king of e-commerce in every market.
When it came to platforms, unsurprisingly, iOS dominated with the higher AOV of any tablet platform. Below is the AOV by tablet platform for the past few quarters.
Similarly the iPad drove the highest conversion rates of any other tablet platform. In Q4 2013 the iPad saw conversion rates of 2.72%. Android was 1.82% and the Kindle Fire just a measly .82%.
The smartphone presents the platform with most upside but its upside may reside less with e-commerce and more with driving new in-store mobile experiences/commerce. When it came to e-commerce the phone is still a distant platform to PCs and tablet in many respect. According to Monetate’s research the smartphone actually saw a decline YoY of 2.20% in average order values. Last Q4 2012 the smartphones AOV $136.61 and in Q4 2013 it dropped to $133.60.
Conversions of purchases from smartphone increased by 26.70% YoY to 1.18% in 2013. What the data suggests is that smartphones are valid entry points to search, discovery, and to help consumers decide what to purchase. Where the tablet is becoming the device consumers use to actually buy. This research from Monetate coincides with the data from IBM’s black Friday report where the following point is made:
Smartphones Browse, Tablets Buy: Smartphones drove 24.9 percent of all online traffic on Black Friday compared to tablets at 14.2 percent, making it the browsing device of choice. Tablets drove 14.4 percent of all online sales, double that of smartphones, which accounted for 7.2 percent of all online sales. Tablet users also averaged 15 percent more per order than smartphone users, spending on average $132.75 versus $115.63 for smartphone users.
Where smartphones may see their true potential is to drive more in-store activity than perhaps traditional e-commerce. In-store beacons may serve as the foundation for this new transaction driver. Apple is aggressively moving forward with implementations of its iBeacon technology. As more of these beacons which have the ability to send targeted and specific data base on precise location are installed in retail locations, retailers will be able to dramatically alter the in store experience. This shift will open new opportunities to influence the behavior of consumers in retail locations. If a store knows where a consumer is in their store it will make it easier for them or brands to offer them information and even promotions in real time.
Image that Coca-Cola puts a rule in place at a local grocery that if a consumer is standing in the isle near Coca-Cola products for a set amount of time, like 1min or more, to offer that person a discount on select Coke products if they purchase today. A smartphone and an abundance of strategically located beacons in stores will lead to this kind of super targeted advertising and promotions.
Technologies like TouchID also stand to impact the mobile shopping experience. This level of security depth will give merchants the ability to not just know where a customer is in store but also that they are who they say they are. Naturally, TouchID is important in the value chain of mobile purchases. This single technology has the opportunity to not just decrease the amount of credit card fraud globally but to also perhaps be a catalyst for an increase in mobile purchasing at large.
Smartphones, paired with in-store beacons, and a secure mobile purchasing mechanism all combined together make for exciting opportunities for brick and mortar stores to add value and to compete against on-line retailers or even use online retail to their advantage.
Mobile devices are invading the PCs territory in nearly every dimension. Monetate’s research pointed out that one out of every three visits to leading e-commerce websites come from either a tablet or a smartphone. Mobile e-commerce orders grew 102% YoY and accounted for 4.22% of holiday e-commerce orders.
On Black Friday, traffic from tablets jumped 89.46% compared to Q4 2012. Similarly, Cyber Monday saw tablet traffic increase to 73.09%. Similarly Christmas day tablet and smartphone traffic was up 46.9% YoY. All data points according to Monetate.
The e-commerce trends are clear. T standout from my observations of market data and research from other and our own internal data is the tablet. You can not ignore the kind of data we are seeing about how tablets are being used in many vectors of consumers digital lives.