Are the easy online gains over?
According to a report from Shop.org and Forrester Research Inc., e-commerce growth appears to be plateauing for some retailers.
The report, “State of Online Retailing 2016: Key Metrics, Business Objectives and Mobile,” shows online sales in 2015 were flat for 17 percent in a survey of 195 retailers, versus only three percent of operators in last year’s report.
“Much of this is due to more retail competition than ever before,” wrote Sucharita Mulpuru, VP at Forrester Research. “More than 800,000 online stores in the U.S. alone are now vying for recognition, market share and relevance with assortment.”
Mobile conversion rates are low: While 65 percent of merchants report gradually improving conversion rates (orders divided by sessions), 59 percent still have mobile conversion rates under three percent, a figure that has held steady for over a decade.
Online consumers are dependent on promotions: Consumers are still spending cautiously and are as influenced as ever on deep discounts. On days like Thanksgiving and Cyber Monday, more than 90 percent of shoppers purchased with some deal or promotion like free shipping or a discount, according to a fourth-quarter survey by Forrester and Bizrate Insights.
Overreliance on standard practices: Many retailers, particularly the smaller ones, rely on tried-and-true online tactics like live chat and paid search marketing. Only a few, mainly the bigger ones, are exploring new technology developments like Periscope or same-day delivery, in-store innovations and alternative payments.
Scale is elusive: While easy to launch, scaling online is “extremely difficult” due in part to high customer acquisition and shipping costs. Plus, expenses are rising. According to the survey, retailers now spend nine percent of online revenues on information technology, up from five percent in 2013. The average marketing cost per order is $20, with 49 percent of those surveyed indicating it has increased in the past year. The average cost to fulfill an order is $10, with 27 percent indicating it has increased over the last year.
While Amazon’s dominance is “a factor” in new online pressures, many respondents were marketplace merchants, and they’re still struggling. Ms. Mulpuru wrote. “You can’t blame Amazon for everyone’s woes.”
- The State Of Retailing Online 2016: Key Metrics, Business Objectives And Mobile – National Retail Federation
- Shop.org, Forrester Research Find Smartphones Top Tablets as Driver of Sales, Traffic for First Time – National Retail Federation
- Despite e-retail growth, many retailers struggle to grow online – Internet Retailer
- E-commerce grew this holiday, but not everyone basked in big increases – New York Business Journal
- More Americans Are Shopping Online, So Why Are Digital Retailers Struggling? – PYMNTS.com
- It’s Amazon and Also-Rans in Retailers’ Race for Online Sales – The New York Times (Tiered sub.)
Is online entering a phase in which the big get bigger and the small get smaller? What do you see as the newer challenges now facing smaller players and e-commerce overall?