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eCommerce Growth is Crashing

Posted On - 07/11/2014 08:44:33


eCommerce Growth: Already Past Its Peak
In the early days of the web it was assumed eCommerce would raze everything in its path.

That it was only a matter of time until all buying and selling would transfer online. And traditional ways of doing business would become obsolete.

While eCommerce growth has been spectacular, behind the headlines lay some stark realities.

Join us for the second shocking part of "Is The Internet Broken?" from our 2014 Open Day. Find out why everything you thought you knew about the internet is wrong. See the video for much more.

High octane

eCommerce penetration: spectacular in markets where the web suits the transaction – dismal where it doesn'tOnline sales are remote. They are impersonal. They offer little chance for interaction or to ‘touch and feel'.

Buying online is the direct opposite of a personal shopping experience.

This isn't bad but it fundamentally affects what sells best online and what's more difficult. And this makes for a vital frame of reference.

For goods and services traditionally bought remotely, sales have transferred easily. Customers are already predisposed to buy in places other than shops.

Similarly, where the complete end-to-end transaction can be completed online, the same is true. Being able to browse, buy and 'take home' purchases all in a matter of clicks from an armchair anywhere amounts to pretty much the most convenient shopping possible. It's no wonder sales of these sorts of goods and services have transferred.

The bottom line is eCommerce growth has been driven by what's easiest to sell online. So much so sales in these markets are now near saturation.

Are you in?

The eCommerce paradox: growth in sales isn't reflected in home deliveriesIf you're finding things hard to believe then prepare to be alarmed.

If internet pure-play retailers were elbowing out traditional shops wouldn't you'd expect to see steady, consistent growth in home deliveries?

Wouldn't you expect to see all those trips to the shops to buy and bring things home replaced by deliveries from couriers as they brought your stuff to your door?

This simply isn't happening.

Growth in home deliveries is near flat in the same period ecommerce sales have more than doubled.

And it's flat because what's being bought is either electronically transferrable, can be delivered through existing post (letters and small parcels) or is simply being reserved so it can be picked up when it suits the customer (click-and-collect). The web simply is not stealing meaningful quantities of the things we traditionally buy in shops.

Horses for courses

Huge percentage market penetration is a sign of success. And while the Internet's dominance in non-store retailing is undeniable it's a market worth 15 times less than store retailing.

The real money for eCommerce lays in making inroads into what is sold in high-street shops. Yet penetration in these markets is pitiful at just 11% (ONS, 2012). And a significant proportion of this - c. 40 - 50% - is click-and-collect, not substitution from pure-plays.

So in the time it's taken to achieve near total dominance in non-store sales, tech entrepreneurs - the finest minds driven by potentially mind-blowing financial gains - have failed to take traditional shop retailing online.

Sales of goods and services sold through bricks-and-mortar remain sold that way. At best all the internet offers is the means to browse, research and potentially reserve products online before going to the shop to conclude the decision to buy them.

It's not that no-one has tried to steal these sales, it's that selling them the 'old-fashioned' way is simply better.

The glory days have passed: the gravy train has left

The Internet has made a great job of consuming those sales that easily transferred to it. But when looking back over growth rates it's surprising how quickly eCommerce has matured.

Despite the once almost fantastic predictions of huge sustained growth the facts tell a different story. From its hey-day of over 30% growth per annum, today it's closer to 10 – 12%. And the predictions show it falling to just 7% by 2020.

Non-store trade like catalogue and TV shopping transferred years ago and the downloadable market for films, music and software will soon be mature. Everything that suits being sold online is pretty much being sold that way now.

So far from razing everything in its path, the Internet has shown what it's good at and 'fessed up to what it's not. eCommerce has undoubtedly revolutionised the sale of particular goods and services. But for the majority of things we all buy, traditional shops will never become obsolete.

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Also in this series
  1. The Internet Bubble Has Not Yet Burst
  2. eCommerce Growth is Crashing
  3. Internet Growth Is Not Materialising
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