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Online and mobile retail in the USA

The technology pedigree of the US needs little introduction. Many of the globally-known household names have originated from the country. Internet penetration at nearly 89% is as high as in most European countries, although geography can make supplying the infrastructure difficult and expensive. Increasing at a rate of 1.1%, the total connected population is still showing signs of modest growth. The same issues with rolling out the infrastructure also make the use of the internet and ecommerce attractive; in some areas it is difficult to physically visit the stores of the most popular brands.

Interestingly, the global position of the US in terms of total internet users has slipped from 2nd to 3rd in global rankings, being overtaken by a more populous country, India. China still retains the number one ranking on this measure.

Analysis in 2015 showed that the US online market was ranked as number one for attractiveness, being scored particularly strongly in terms of growth potential and with consumer behaviour. This indicates an openness to engage more fully in digital channels, and that the country has infrastructure to support this.

Total retail sales were reported to be worth $4.83 tn in 2016 by the US Department of Commerce. The same report in February 2017 also showed that retail sales via websites totalled $3.93 bn in 2016, averaging 8.1% of total retail sales over the year. Whilst web sales grew by 15.1% on 2015, total retail averaged 2.1% growth through the year.

Overall growth rates in ecommerce are expected to average out at 7.4% between 2015 and 2021. Categories of particular interest are clothing at 8.44% CAGR, consumer electronics at 9.6% CAGR and personal care at 10% CAGR. Clothing is interesting as this reflects growth trends in other territories and for the international merchant, a key area where local culture and design is often in demand in new territories. Consumer electronics will be harder for cross-border sales as manufacturing and distribution rights may limit a merchant’s ability to sell in to the US.

In distance-selling, individual categories perform differently and the latest (2014) figures from the US Department of Commerce reporting distance sales (catalogue and ecommerce) show fashion to be one of the strongest individual sectors online. Interestingly, the sporting goods, book and music sectors are relatively small overall and online accounts for almost as many sales as offline. By way of contrast, the drugs, health and beauty aids sector is the largest mail-order retail sector, whilst ecommerce sales are still only a small proportion of the total.

Providing a more focused view on the online retail picture, the tables below highlight the key product categories and market share of each. In contrast to other global markets, electronics (including computing) is still growing strongly, whilst apparel and accessories still outperforms at 18.7% growth through to 2020. Electricals and fashion are the two core categories for retail in general and online is no exception.

Category insight from Internetretailer.com and top500.com shows some interesting differences in growth between larger and smaller businesses, as well as key categories for growth. For example, smaller retailers are seeing strong growth in apparel, computers & electronics, and sporting goods. Homewares and home improvement are, however, dominated by the bigger brands. Whilst the stronger growth of the smaller brands is probably inflated by them starting at a lower baseline, it does provide an indication that there is room in the market for alternatives to the big names; some ideal categories for cross-border merchants.

Previous data-points have shown the overall trends for ecommerce growth in the US. It should not come as a surprise to note that the leading online retailers (with two notable exceptions) are multi-category.

All of the brands present in this top 10 have also seen a substantial increase in the number of unique visitors over the previous year. For example, Amazon is up from 164 million to 183 million, Walmart has almost doubled, going from 57 million to 101 million, and Lowes has gone from 19 million to 26 million. Sears have dropped out of the Top 10 for 2016, being replaced by Kohl’s who had 33 million unique visitors.

M-commerce

Mobile commerce, as a term, covers two distinct and very different device types - tablet and smartphone. It is not unusual for a consumer to own both types of device, and increasingly retailers are seeing customer journeys involving both before a purchase is made.

ecommerce, as a percentage of total retail sales, is growing strongly in the US. However, mobile commerce is making the biggest gains. Early growth has been particularly strong and in the first half of 2016, Criteo reported m-commerce growth levels of 30% by the top retailers. This growth brought the share of total ecommerce sales via mobile device to 52%. Criteo also reported that the share of transactions made via mobile device increased by 17% in the first half of 2016.

In a similar picture to the popularity of ecommerce brands, the Top 10 online retail site visits by unique visitor on mobile in 2016 reflects many of the global brands known for their online presence. Similarly, the big US retail brands also figure highly in the comScore report.

Worthy of note is the poor performance of BestBuy. At the time of the survey, the brand was significantly underperforming the market in terms of mobile visitors through both app and mobile web. Anecdotal evidence from a variety of sources, including Neumob, report that Best Buy invested heavily in a new app and mobile optimised website during 2016 and this performed far better than expected, and is possibly the reason why Best Buy ranked poorly earlier in the year.

The key to successful app and mobile-optimised website performance in the US is usability, including navigation, speed, and particularly its ability to cope with peak trading periods. As with other markets, the app vs mobile-optimised debate is still going strong.

As with all areas of digital trading, there are caveats to the ‘mobile first’ mentality. Desktop still provides an important role in the customer’s digital journey, and more so in certain sectors.

As this graphic from comScore illustrates, sectors such as consumer electronics and computers are weighted strongly towards desktop sales, whilst mobile accounts for a large proportion of sales in video gaming, jewellery and flowers.

Tablets are also an important part of the mobile commerce story, representing circa 14% of total ecommerce retail sales. Research shows that the number of tablet users is expected to increase.

Overall, however, the trend is a rapid move towards the mobile experience. Price point, complexity of the purchase, and visuals all have a role to play in determining the right focus.

Overall, the US has a strong and growing ecommerce market. Worth over $393 bn and growing at around 8%, there is a lot of potential for growth. A sound mobile offering will help international merchants gain traction in this market, not forgetting a sound desktop experience.

TAKEAWAY: There is a lot of growth potential in the US digital market, and a multi-device strategy is required to realise optimum potential.

Cross-border shopping

A majority of US online shoppers are very open to purchasing goods and services from international merchants, with 42% having done so, according to research carried out by Ipsos for Bronto Software in December 2016.

Figures reported by Paypers.com showed that in 2013, 34.1 million cross-border online shoppers would buy $40.6 bn worth of goods growing to 41.8 million buying $80.2 bn by 2018. US cross-border online consumers primarily shopped with the UK (49%), China (39%), Canada (34%), Hong Kong (20%) and Australia (18%).

Typically, choice, price, and uniqueness are top of the list as reasons for shoppers purchasing cross-border.

Cross-border internet shopping is still done via a desktop although, at a combined 22% the mobile consumer should not be ignored.

TAKEAWAY: US consumers are very open to shopping internationally, with price and choice being the top motivators. Use your brand’s uniqueness in marketing activities to appeal to these consumers.

 

 

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