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E-commerce in USA growing at 8.6% by 2022

E-commerce is important in commercial market nowadays since world is moving more and more into digital realm every day. E-commerce include its around the clock availability, the speed of access, the wide availability of goods and services and international reach.

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Definition / Scope

E-commerce refers to buying and selling activities that takes place through electronic transaction. E-commerce allows consumer to electronically exchange goods and services with no barriers of time or distance.

E- commerce allows customers to choose a broad variety of products from a wide range of shops and retailers. The globally rising number of internet as well as smartphone users also impacts the adoption of e-commerce and drives growth. Electronic commerce has expanded rapidly over past years and is expected to continue in growth.

E-commerce can be divided into three types: business to business, business to consumer and consumer to consumer. A website or web portal acts as a platform and facilitates the exchange of merchandise funds, data etc. It also assist in accomplishing company's transaction with different parties like customers, intermediaries, market makers and suppliers electronically.

Market Overview

The e-commerce market has changed the way business is transacted, whether in retail or business to business, locally or globally. The internet is global marketplace, affording even the smallest retailer a national, if not a global presence. The scope of e-commerce marketplace is difficult to measure. The e-commerce market has become such a vital part of economy that is difficult to pinpoint exactly where e-commerce begins. E-commerce has been hot topics when it comes to digitalization and disruption change to traditional industries.

Top 10 US companies, Ranked by retail e-commerce sales, shares 2018

% of US retail e-commerce sales

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Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet


Market Risks

  • Data Security: Every business faces the problem of data security, and e-business intensifies these challenges. Customers are needed to provide personal as well as financial information while making a online transaction. Unprotected online service, credit card fraud, hacking etc are some major issues related to online securities.Failure to protected data can lead to fines and loss of faith from customers.
  • Charge-back: There are several reasons where product are returned back to retailer or have to pay back to customers. Reasons like Product never arrived, purchase made from stolen card, product not meeting expectation, shipped wrong product etc. If charge back is claimed valid, ecommerce merchant are required to pay the amount back with the processing charge.

Top Market Opportunities

  • Reaching a global market: E-commerce offers platform where business houses can sell their product and services globally. Due to the internet's accessibility, millions of people across the world can view companies website at any time resulting to reach larger audience. Offline stores are limited by geographical area that they can serve where as when it comes to e-commerce there is no limitation concerning geographical area.
  • Evolving digital landscape: Increasing use of social media bring a huge opportunity for growth of e-commerce. Pinterest, Facebook, Instagram, Twitter and Snapchat are some major social media channel through which seller can reach to mass audience.
  • Customer to customer: C2C is new emerging business model where customers can trade with each other through online environment. C2C represent a market where one customer can purchase from another customer using third party business or platforms to facilitates the transaction. Third party makes income from fee charged to seller for listing items for sale, adding on promotional features and facilitating credit card transaction. Taoboa, Amazon, eBay, Kickstarter etc all offer function to enable C2C transaction.

Market Drivers

  • Mobile internet penetration: The adoption of the latest mobile technologies is playing a big role in the growth of e-commerce. Customer are getting sharper and are more informed about their needs, with the help of e-commerce they can choose from variety of products in one click.
  • Payment options: With the advent of digital wallets the payment option have shown massive over past years. Wide rage of options has made it easier for many people to buy online.

Industry Challenges

  • Building trust and brand: One of the main key factor of any business success is building trust and creating brand loyalty. There are many factor that play role in developing brand image like customer data protection, product quality, delivery of product and so on. Failure to deliver any one of aspect of customer demand would lead to loosing their trust.
  • Product return and refund: Return of product from unsatisfied customer can harm companies reputation and can cause financial loss, mainly to those companies who provide free delivery.
  • Market competition: E-commerce platform is transparent which provides customer with comparison option in terms of quality and price of goods and services as there are many companies offering same product and services. It is important for online stores to be able to differentiate themselves from other competitors to survive.

Technology Trends

  • Artificial Intelligence (AI) and Machine Learning: Machine learning can contribute valuable options to e-commerce software. Intelligent algorithms become instrumental in customer segmentation and personalization. They help to identify patterns in customer’s web browsing and thus create huge possibilities for personalized recommendations.
  • New payment system: Convenience is essential factor in creating value. Digital wallet and online payment system is proving faster, efficient and secure payment option to the customers. Net bank, PayPal, Google wallet, Amazon payment, debit and credit card etc are playing major role in supporting the growth of e-commerce.
  • Product customization: Product customization is emerging as one of the leading e-commerce technology. Customization makes it easier for customer to use and meets demanding needs of client. Automation is also emerging as a new trend in process of customizing product and services. Companies like Amazon, Alibaba, Flipkart etc are focusing on providing a superior customer experience. Each customer are treated as individual target rather than generalizing the mass.

Regulatory Trends

The US has numerous federal laws that address various aspects of conducting business on the internet.

  • The Federal Trade Commission Act of 1914 (FTCA) broadly prevents unfair methods of competition and unfair or deceptive acts or practices affecting interstate commerce. The FTCA applies to advertising on the internet.
  • The Children’s Online Privacy Protection Act (COPPA) governs the online collection of personal information from children under the age of 13. More specifically, COPPA applies to companies with websites and online services that are directed at children under the age of 13 and have actual knowledge that they are collecting information from children under the age of 13.
  • The Computer Fraud and Abuse Act governs computer hacking and makes unlawful certain computer-related activities involving the unauthorised access of a computer without authorisation.
  • The Restore Online Shopper’s Confidence Act (ROSCA) places restrictions on third-party data passing, which occurs when one company (the ‘initial merchant’) passes along its customers’ billing information to a third-party company which may then charge such customers for goods or services that they did not consent to purchase. Under ROSCA, a third-party seller is prohibited from charging a consumer for any goods or services sold on the internet unless it has disclosed clearly all material terms of the transaction, and has obtained the consumer’s express informed consent to the charge. Although initial merchants are prohibited from disclosing to third-party sellers any billing information used to charge consumers post-transaction, this provision does not extend to subsidiaries, corporate affiliates or successors to the initial merchant.

Market Size and Forecast

  • E-commerce revenue in 2018 amount to US $504,582 million. (This revenue figure includes, B2C digital sale of physical goods but excludes B2B, digital media, digital services and resale of used goods)
  • By 2022, e-commerce is expected to grow 8.6% creating market volume of $700,578 million by 2022.
  • User penetration is 78.8% in 2018 and is expected to hit 80.2% by 2022.
  • Toys, hooby and DIY cover largest market segment with market volume of US $152,912 millions in 2018.

Market Outlook

Retail e-commerce are projected to grow at a fast pace and reached over $638.05 billion US dollars in 2022 from $360 billion US dollar in 2016. Retail e- commerce is about 9.6% of total retail sales in US as of the third quarter of 2018. Customer satisfaction is relatively high from on-line retail. An estimated of 78% of internet users in US had purchase product online in 2017.

Mobile shopping is growing in e-commerce market in US. In 2016, it was estimated that around 136 million mobile user have some kind of purchase via mobile app or web browser. Mobile retail revenue is projected to reach $420 billion US dollar in 2021 from $156 billion US dollar in 2017. Within mobile market, customer has also began to turn to mobile payment and mobile payment apps or digital wallets.

Competitive Factors

  • Growth of ecommerce has greatly expand customer choice. Customers are no longer limited to retailers atore within convient geographical reach instead may go for other online stores whether national or international.
  • Transparency of price is of great benefit from consumer perspective but it also allows other retailer to monitor price charged by their rivals.

Key Market Players

Amazon is key market player in field of e-commerce in US with market coverage of 49.1%. Amazon provides platform where third party can sell their product and deliver items to Amazon shoppers. Amazon direct sales is 32% and retail sales is 68^%, where third party is involved.

Ebay is second leading e-commerce industry in USA covering 6.6% of e-commerce sales. In 2017, revenue of ebay was $9.567 billion. 42% of ebay revenue comes from USA and remaining 58% comes from outside USA.

Strategic Conclusion

E-commerce industry in USA has shown growth over the decade and is expected to grow in future also. With the help of e-commerce one can get the opportunity to have their product and service available to the customer 24 hours. E-commerce provides good exposure to business and help them reach out to potential customers. E-commerce has made shopping easier by providing wide range of option to select from and also provide transparency in terms of product price. Technology innovation like digital payment, digital advertisement and personalized services are also supporting the growth of this sector.

References


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