One of the many things I keep an eye on is overall trends in e-commerce. If you have followed my analysis, you know I am still waiting for a true tipping point in e-commerce. As I shared here, worldwide e-commerce is still less than 10% of retail commerce. This varies by country — markets like India and China have a much higher and more balanced percentage between online and offline. Developed countries like the US, the UK, and key parts of Europe range between 20-30% of online retail as an overall percentage. Most analysis on this subject is generated on the assumption this is a “Winner Take Most” category. Meaning, Alibaba in China remains dominant but other vendors like JD.com and other more segmented and focused competitors can carve out a niche but not challenge the dominant players. Similarly, Amazon is viewed as a winner take most in the US, UK, and several other markets where they are investing heavily in logistics. This does not mean other players will not take share, only that there will be a few dominant players and a host of smaller players. It is critical to understand the winner take most thesis applies to specific markets and is not a worldwide view. So, the winners in each market will vary heavily vs a worldwide dominant player in e-commerce.
Thre are many ways you can slice who the winners and losers may be when it comes to the point of purchase but I think an interesting way to start looking at this is to understand the dominant categories that are purchased online. From our data collection practices, I’ve charted the most recent look at Q3 e-commerce categories consumers said they purchased online in the last 30 days.
We have quarterly data for over 90 categories but I’m showing you the top 21. With the exception of a few areas, you can sum up this list by fashion and consumer packaged goods. This is one reason why most analysis and data on Amazon has them threatening department fashion stores like Walmart and Target. If consumers start to get more comfortable ordering common and frequent CPG items online, then the likes of Target and Walmart are diminished to only the things you need in a pinch and ASAP. Obviously, if Amazon can also figure out within-the-hour deliveries, that can take some of that share. But I’m not convinced Amazon can blanket their markets with that solution.
It is abundantly clear the fashion department stores are in serious trouble. Fashion and clothing shopping behavior is clearly changing in ways many department stores can not adapt to. This chart from a Morgan Stanley clothing retail study shows some of the changing behavior in purchasing trends at department stores.
The depth of selection and aggressive pricing strategy which made big retailers like Walmart, Target, Macy’s, JC Penny, etc., all successful are dead in the water value propositions for online commerce. E-commerce will always have more selection and better prices. The value of physical retail is being reduced to instant needs and that may not be sustainable either.
As I mentioned at the start, looking at the categories where purchasing behavior is changing is key to looking at the short and long term trends of which parts of physical retail is about to be disrupted and which may have a fighting chance.