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Cyber Monday: Is online shopping ever going to make traditional retail a thing of the past?

online-sellerCyber Monday: Is online shopping ever going to make traditional retail a thing of the past?
It’s the time of year where retailers present new products, and dish out sales and deals in an effort to capitalise on the highly lucrative Thanksgiving and Christmas shopping seasons.

Marketers are seeking new ways to make the Christmas shopping season bigger and better year-on-year, and Cyber Monday is becoming as popular as Black Friday.

But as online retail activity surges, some are wondering whether it could actually bring an end to high street ‘brick and mortar’ shopping.

 

How does ‘Cyber Monday’ reflect the rise of online shopping?


According to a research report from Adobe (via Forbes), Cyber Monday 2017 is expected to generate $6.6b and become the biggest day for online shopping the US has ever seen.

The name ‘Cyber Monday’ was coined back in 2005 by Ellen Davis and Scott Silverman, as a way to describe the deluge of online retail activity on the Monday after Thanksgiving (and Black Friday).

For many US consumers, the day falls on the first Monday after the last paycheck before Christmas, making it ideal for online Christmas shopping. As it falls on a weekday, people typically tend to make their online purchases from work rather than home.

Interestingly, buying habits differ between Black Friday and Cyber Monday. Black Friday has a big focus on money-off electronics and gadgets from major retailers, whereas smaller or newer businesses who can’t compete with big chains tend to capitalise on Cyber Monday. While the word ‘cyber’ may carry connotations of electronics, the largest proportion of purchases tend to revolve around clothing.

Cyber Monday has become the single biggest day of the year for online shopping worldwide and is showing no signs of slowing – Cyber Monday sales have grown by over 10% in every successive year since 2010.

With online sales gaining traction in late-November’s Black Friday and Cyber Monday events and Amazon founder Jeff Bezos recently becoming the richest person in the world, some are asking whether online shopping could become such a fundamental part of our lives that it replaces physical shopping completely.

With that in mind, we look at the rise of online shopping and what impact it could have in the future.

 

How has Amazon influenced the growth of online shopping?


Amazon is a company at the forefront of the online shopping revolution.

Now the fourth biggest publically traded company in the world and the most valuable US retailer by market capitalisation, Amazon was founded in 1994 by Jeff Bezos under the name ‘Cadabra, Inc.’. The company was created largely so Bezos could join in with the internet business boom of the time.

By 1995, Amazon.com had launched as an online store, joining a limited market space. The store was named after the biggest river in the world (in volume) because he planned to make it the biggest store in the world.

It started as an online bookstore, and selling books is still a major part of its brand identity to this day due to its hugely popular Kindle business. In 1998, Amazon expanded to sell CDs and in the years that followed its product line increased substantially.  This culminated in the purchase of Whole Foods in 2017 which brought Amazon into the grocery market in a significant way.

In Amazon’s early years it was criticised by many analysts and stockholders due to its inability to turn a profit, but this was an intentional slow burn business plan that began to pay off in 2001.

In 1999 TIME magazine named Bezos its Person of the Year for proving the viability and popularity of online shopping, and major acquisitions and partnerships have left Amazon the de facto success story for online retailers.

Amazon’s dominance of the online market has led to the creation of aggressive competition and spearheaded the evolution of online selling. For example, Amazon popularised free-shipping for deliveries, which is now used by many other businesses, both online and otherwise.

 

How fast has online shopping grown?


So here’s an idea of how much activity Amazon and other online retailers have picked up since the turn of the millennium…

Back in the late 90s, only around 40 million US citizens were using the internet. Online sales across all stores made around US$2.4b. The number of people using the internet has since soared to 287 million in the US alone, and 2017’s online sales are forecast to reach around US$440b.

According to the US census bureau’s department of commerce, online shopping or ‘e-commerce’ made up around 8.2% of all sales in the US during Q2 2017.

While it still doesn’t seem like a lot, that figure has grown from around 3.5% in Q1 2008.

This indicates that while it took from the 90s until 2008 for online sales to make up 3.5% of a quarter’s total retail sales, that figure has more than doubled in less than a decade – a massive acceleration.

According to a separate report from DigitalCommerce360, US e-commerce sales made up around 11.7% of all retail sales throughout 2016, showing a 15.6% increase in activity from 2015;

‘online sales are growing much faster than store sales, which suggests that e-commerce remains a primary growth driver in the retail industry as a whole.’

A 2014 feature from Adobe’s CMO forecast that online retail sales would grow to US$370b in 2017, a figure that has already been bested by 2016’s US$394.86b, indicating that the sector is growing even faster than many analysts predict.

Meanwhile, in the UK the Telegraph reported at the beginning of 2017 that online sales rose over 27% in the past two years while high street sales fell.

Much of the recent boom is being driven by an increased online presence for most major retailers, as well as the rise of internet browsing on smartphones.

With more and more online stores becoming mobile-friendly, online shopping is an activity consumers can do on-the-go, 24/7.

 

What’s next for online shopping?


Online sales still make up only around 10% of a year’s total retail activity worldwide, which means there is still lots of room for the sector to grow in the coming decades.

A report from eMarketer published in July of 2017 forecast that by 2021, worldwide retail e-commerce would total over 16% of all retail activity. This would be more than double the 7.4% seen in 2015;

‘Worldwide retail ecommerce sales will reach $2.290 trillion in 2017, making up 10.1% of total retail sales. This share will surpass 16% by 2021, when sales will hit $4.479 trillion.’

The biggest question then is how high street ‘brick and mortar’ retail stores will continue to cope with the major shifts in retail dynamics.

Some major UK retailers, such as Marks & Spencer and Debenhams, have reportedly struggled to keep up with the growth in online activity. High street retailers are increasingly running the risk of losing customers accustomed to lower prices and more convenient online service. According to analysts from Liberum;

‘We have long believed that the move into online for mature retailers comes at the price of paying more to reach customers who are spending less,
We do not believe that mature domestic retailers such as M&S, Next and Debenhams are doing significantly more than shifting customers from stores to online, but are need to pay for both channels to market anyway.’

So evidently, the growth in online sales and the slowdown it’s causing on the high-street is becoming a significant enough trend that it is causing some major chains to have to rethink their businesses in more fundamental ways in order to remain competitive and continue growing in this new environment.

On the other hand, this has also led to rapid growth for many online retailers who have capitalised on the boom in the rapidly growing online sales area.

On top of Adobe’s bullish forecasts for Cyber Monday 2017, the group predicts that online sales for this year’s US holiday season will top US$107.4b overall, a 13% year-on-year rise that would outpace the forecast rise in high street activity by as much as 10%.

Adobe predicts that retailers that are most successful during the period will be ones with a wide selection of products at lower prices, simple and accessible storefronts, and free shipping.

The race to secure customer convenience and satisfaction is what looks set to continue driving online retail specialists over the coming year.
 
 

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