Get ready for the barrage of bad speculation about Twitter and its imminent dominance of online retail. If you didn’t hear already, Twitter hired Nathan Hubbard, a former Ticketmaster exec, to figure out its commerce revenue stream. Interesting yes, but game-changing, no. Here’s why: startups tend to look for smart people first and figure out their jobs later. The mentality often goes like this: “We need to figure out what we’re going to do in X, this guy has a rock star background in it, let him build a team and see what happens.” And even if the person doesn't succeed, it's OK. They move on. These people have great resumes. That said, here are the biggest reasons for my question marks around Twitter’s success in commerce:
What works best in commerce is something Twitter already gives away for free, which is its tweets. For example, some of the most successful users of Twitter in a retail context are companies looking to liquidate inventory or send notes about limited supply of promotions, like the Dell Outlet or Groupon — all done effectively via a tweet. In many ways, a tweet is like an email title — it draws people into a click with a few sexy words. The challenge is that tweets have the same problem as emails: they don’t make their technology parents any money because everyone gets to use the tools for free.
We have just finalized our projections for US eCommerce for 2013 and not surprisingly, the numbers are strong — excluding auctions, we expect that figure to be $262B, 13% higher than the total in 2012. A few highlights of note:
Three categories capture over one-third of that total. Yes, only three! Apparel and accessories alone are a $40B-plus sector (which probably explains the heavy investment of players like Amazon in the space), followed by consumer electronics and computer hardware.
Overall web penetration is 8%. That may not seem very remarkable, but that figure is deceptive because it’s weighed down by the grocery/food and beverage category, which is one of the largest overall but least penetrated online. In fact, if we exclude grocery from the mix, overall eCommerce penetration in the US jumps to 11% of overall retail.
eCommerce is a jobs creator in the retail sector. For the first time, we have estimated the total employment in the US that results from the online retail sector. Our estimate is that over 400,000 individuals are employed in some web retailing function, of which more than half are salaried professionals (i.e., all non-fulfillment and call center employees). Furthermore, many of these salaried positions have promising long-term career growth trajectories. Given that there are probably about 750,000 such salaried jobs overall in retail (my estimate, approximately 10% of the 7.3M people employed in retail overall), the fact that the eCommerce sector has nearly 200,000 of them is a remarkable testament to the employment impact of this sector.
In a recent blog post of mine, I mentioned that Forrester had launched the Retail eCommerce Playbook. This playbook provides a structured framework to guide eBusiness professionals through their most strategic initiatives in eCommerce – from creating a vision to benchmarking results against peers.
It’s not a secret that consumers are constantly connected to the Web and it’s having a huge impact on how they research and buy products in every sector. As such, it is imperative that eBusiness executives have the appropriate tools and knowledge to execute a strong web presence that not only showcases their brand but also enables shoppers and store associates to research and buy. We crafted this playbook to address all the key elements of success. This playbook will help you:
Discover the importance of a best-in-class eCommerce business by providing eBusiness executives with insight into the opportunity for eCommerce, its growth trajectory, and the current landscape that retailers face as they continue to navigate this channel.
You may have noticed that over the last several months, Forrester analysts have been writing “playbooks,” which are holistic overviews of various aspects of our respective coverage areas. In the retail eCommerce world, we’ve released a few chapters:
In the months to come, we will fill out the rest of the playbook with overviews of tactics, technologies, and metrics to support different organizations, whether they are just beginning their eCommerce journey and looking to build a business case or whether they are advanced sophisticates looking to improve their businesses even further.
We’re open to feedback and look forward to hearing your thoughts on questions you may like to see addressed in this playbook.
The rapid growth and ubiquity of smartphones has led many to conclude that a significant portion of Internet activity, including shopping, will migrate to these mobile devices. To help eBusiness professionals in retail get a better sense of the real size and opportunity that exists, Forrester has released its “US Mobile Retail Forecast, 2012 To 2017.” Retailers beware: while mobile commerce is growing and undeniably shifting how some consumers buy, the pertinent facts are that:
Total US mobile retail is still small. Forrester estimates that of the 132 million US mobile Internet users in 2012, only a quarter of those users have ever made purchases via their phones. While we expect the retail mCommerce penetration rate to double by 2017, it’s still a tiny portion of eCommerce — and, consequently, a minuscule share of overall retail.
Significant impediments exist for mobile retail. The main road block to mobile sales is the checkout experience; it’s the single most important feature when it comes to driving conversions on mobile devices. Adding an easy checkout experience, like PayPal Express, will enable users to more easily convert – even with the smaller screen – but how much that moves the needle remains to be seen.
Consumers prefer the mobile Web to apps, despite retailer investment. Consumer awareness of and/or interest in retail apps is low: Only a tiny share of any given retailer’s shoppers appears to download their app. Most shoppers who access a retailer’s mobile presence get there by clicking on links from mobile search engines or from mobile emails.
Forrester recently completed the “State Of Retailing Online 2013: Key Metrics And Initiatives” report in conjunction with our friends at Shop.org. It is available on Shop.org (with a subscription) now.
Some of the reports highlights include the following facts:
Web sales continue to grow (duh!). Retailers we surveyed experienced 28% growth on average in 2012 over 2011. Furthermore, 72% of those retailers are experiencing double digit growth.
Key eCommerce metrics are improving. The retailers we surveyed generally responded that site conversion rates, average order values and the percentage of repeat shopper sales all grew in 2012.
Mobile growth rates are strong. Mobile commerce grew at a triple digit pace last year for the retailers we surveyed, but off a teeny base. Furthermore, the debate remains on whether mobile traffic with its anemic conversion rates, actually hurts “the mother ship.” Retailers were split on that assessment.
2013 initiatives will focus on site optimization. Of the retailers we interviewed, site conversion rate and redesigning the web experience – in other words, optimizing the overall online experience -- topped the list, yes, more than even investing in mobile. Many retailers specifically called out plans to focus on the checkout experience and to adjust their site to accommodate a responsive design framework.
Shop.org members can access the document here and Forrester clients will be able to access the document on January 28, 2013.
It’s no longer a question of whether or not consumers will adopt mobile as an interaction and transaction channel this holiday shopping season. Over the last year, mobile has proven itself to be a viable channel that will play an increasingly prevalent role this year and in future years.
Case in point: mobile retail set records this holiday shopping season with 16 percent of all online sales being conducted through a mobile device -- compared to 9.8 percent last year. In addition, 24 percent of consumers use a mobile device to visit a retailer’s site, up from 14.3 percent in 2011. Whether it’s a tablet, an iPhone, or an Android, consumers are researching more products and making more purchases than ever before through their mobile devices. A full overview of the IBM Digital Analytics Benchmark Cyber Monday data, which is a cloud-based web analytics platform that tracks more than a million e-commerce transactions a day, analyzing terabytes of raw data from 500 retailers nationwide, can be found here.
Why the mobile push? For consumers, it’s about convenience, efficiency, and accessibility, whether shopping online or in-store. Some traditional brick-and-mortar retailers, however, are still wary of mobile and hesitant to bridge ecommerce mobile initiatives with the in-store experience. That attitude has to change in order for these retailers to keep pace with the multiscreen, digital consumer. Today, four in 10 smartphone users search for an item and research prices while they’re right in the store.
In two recent instances in public forums, I’ve heard eBusiness executives talking about some rather disturbing uses of personal data. One was the CTO of a large big-box retailer who raised the possibility that health insurance companies could track our food purchases, sending dissuading texts to us whenever we chose to eat at greasy spoons or Burger King. Another was a software CEO who said it was inevitable that our cars would send real-time data on our speeds to our car insurance agencies. Laughter ensued from the audiences, but it should have been alarm and shock. I find it hard to believe that the good that could come from sharing this sort of data with companies (which, I would argue, don’t exactly have a reputation for benevolence) would outweigh the potential for abusing the data. Even in the retail world, there are a lot of companies trying to match users across different devices based on their IP addresses to create profiles of behavior. Call it lighter versions of the FBI “forensics” that took down David Petreaus. (Btw, Paula Broadwell has been a friend of mine for years and is one of the nicest, smartest, and most generous people I know. An issue that’s been overlooked is the violation of her privacy that kicked off this whole scandal. For the record, because people have asked me, I think she's been unfairly attacked at best and irreparably slandered at worst with digital information that should have never made its way to the light of day. I just hope she gets the last laugh when Angelina Jolie plays her in the movie.)
As mobile Internet use has grown, so has the usage of smartphones in stores. Much of that in-store phone usage is innocuous — using store maps, for instance — but some of it is threatening to brick-and-mortar stores, particularly when shoppers use phones in stores to research prices. While "showrooming" isn't a term that many consumers know (only 16% awareness according to com Score), it's nonetheless happening.
The good news: Consumers with smartphones only “showroomed” prices in stores on average a few times in a 6-month period. Aprimo, an marketing service firm that surveyed about 2,000 consumers in October about their mobile price-checking behavior in stores for that datapoint. I suspect that amounts to a very small percent (i.e., less than 5%) of shopping visits. The bad news: That survey (and comScore's) confirmed the worst of what many in the retail industry have expected -- that showrooming is here to stay. And it hurts stores. After all, most of the showrooming shoppers told us that they usually find cheaper prices online when they research them. Some highlights:
It’s not just consumer electronics and high-ticket items like appliances for which consumers research prices in stores. In fact, the second and third most showroomed categories: grocery (!) and apparel/accessories/footwear. Yes, I was surprised by that, too.
A whole lot of people say they’ll be showrooming more in the future. In fact, the segment that’s most likely to spend the most online in the future (18- to 34-year-old men) is the group most likely to do this type of mobile price research in the future.
Forrester’s “US Online Holiday Retail Sales Forecast, 2012” launches today; in it, we predict that this November and December alone are expected to pull in $68.4 billion in online revenue, a 15% increase over 2011. We believe web retailers are well-positioned to benefit from this shopper spend if they realize that consumers are:
On the hunt for deals. More than half of US online adults are more price conscious than they were a year ago. As the Web channel has become synonymous with value, retailers should expect consumers to be searching for deals through a variety of touchpoints, at home and in-store on mobile devices. Retailers need to prepare for aggressive holiday showrooming and the possibility of being undersold or being asked for a price match.
Looking for free shipping. Fifty-seven percent of US online adults shop more with retailers that offer free shipping, and 27% add unplanned items to their cart in order to meet free shipping thresholds. Last year, 76% of the top 50 online retailers highlighted holiday deals on their home pages and 50% called out holiday shipping promotions. As price continues to be a top consideration for consumers, retailers must offer and prominently display holiday shipping promotions or risk losing customers to competitors that will.
Shopping on key dates. During the 2011 holiday season, the top 500 retail websites saw holiday traffic peak during Thanksgiving, Black Friday, and Cyber Monday, each of which drove more than 170 million unique US shoppers to the Web, and they together accounted for more than $2.5 billion in total online sales. Forrester expects that this trend will continue through 2012.