According to the Census Bureau and a report out this week from FTI Consulting, the rate of growth of online sales is slowing. To be clear about the terms, that doesn’t mean online sales are declining; it means that sales are growing less rapidly. Where for the last five years, the rate of growth of online sales was usually in the range of 14% to 17%, that growth rate has steadily declined since the middle of 2018 and in the most recent quarter was growing by 12%.
It’s not time to hit the panic button. But it is time to ask what the change means and what will happen now. We are seeing a classic growth curve that is now hitting maturity and flattening out. It is getting harder for retailers and brands to have high growth rates online. As time goes on, online growth will come increasingly from market share gains and not from growth in the market. Market share growth is harder to get because competitors fight back using lower prices and other promotions that make the market less profitable for everyone. It also means that adoption of online shopping has gotten closer to maxing out its share of the market.
At this point, the growth is going to come from selective places. Merchants tell me that adoption of online shopping is exploding in footwear. Where historically consumers wanted to try shoes and sneakers on before committing, they are getting increasingly comfortable with trying on at home and returning the ones that don’t fit. It’s no doubt that free shipping and returns have facilitated this attitude change, but it’s not clear whether free shipping and returns will work for the bottom line in the long run.
There are also sectors that have not had high rates of online adoption that are ripe for innovation. Here are a few:
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Grocery: The vast majority of grocery products are bought in-store. Consumers don’t want someone else to pick out their meat, fish, chicken, fruits and vegetables. But if you ask a consumer if they would shop online if they could get the produce and protein the way they like it, they almost always answer yes. No one wants to spend time picking things off shelves and waiting in checkout lines if they don’t have to. The technology exists for visual software to do all that selecting but it will take a lot of capital and a lot of moxie to arrange it all in one place to make it happen. Because the need is there and the technology is there, it is only a matter of time before massive online adoption happens. The grocery industry is over $700 billion, and when the change comes, growth rates in online sales will be heavily impacted by the change.
Eyewear: Over 95% of prescription eyewear in the United States is bought in stores. One of the roadblocks to making the change to online is having eye examinations available online. A number of contenders for that innovation are close and are working with the FDA to be permitted to offer their products. It’s hard to say when that will happen but it should be in the next couple of years. When that change comes and consumers find they can get reliable eye exams sitting at home, they’re going to want to shop online for their glasses and the industry will change dramatically.
Date: 18/07/2019
Source : Forbes