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Latest Stats Show Mixed Picture For Retail E-Commerce in U.S.

The latest quarterly statistics on the retail sector, including retail e-commerce, were released from the U.S. Department of Commerce earlier this week. Once you are able to digest the dense government language and poorly-formatted charts and tables, you can see that the overall picture is positive, with growth pointing in all the right directions. Yet the data also show how it is becoming more important than ever for retailers to formulate an e-commerce strategy if they are to stay competitive, for it is e-commerce that is fueling much of retail’s growth.

Retail e-commerce shows healthy growth compared to sector overall . . .

E-commerce was the clear winner in these data: sales reached $97.3 billion in Q2 2016. That’s an increase of 4.5% over Q1 2016, and of 15.8% over the same quarter in 2015. It also means that e-commerce this quarter made up 8.1% of total retail sales. In other words, e-commerce sales in the U.S. are on the right trajectory leading up to the all-important holiday season.

Total retail sales overall, which include the physical store sales that make up the bulk of consumer spending are growing much more slowly (albeit from a significantly larger base), reaching $1.209 billion in Q2 2016. That’s an increase of 1.5% over Q1 2016, and of 2.3% over the same period for 2015. Again, the right growth trajectory, but small enough to indicate that in this massive sector, which makes up about 8% of the U.S. economy, there are retailers who are struggling to adjust to today’s digitally-focused consumers. Indeed, if you subtract e-commerce sales from the total, retail growth in Q2 over the previous year is a rather anemic 1.2%.

. . . but more retailers need to take action to counter the Amazon juggernaut

The reason these numbers present a mixed bag? One word: Amazon. Amazon makes up a gigantic portion of the total U.S. e-commerce market, having reported revenues of $17 billion in Q2 2016. That’s nearly a fifth of all e-commerce sales in the country. Yes, it helps that Amazon has not had a legacy bricks and mortar business to contend with. Amazon thus does not have to make decisions about shutting stores as foot traffic declines, like Macy’s has recently done.   And yes, the company has prioritized growth over profitability (though in the last few quarters it has achieved profitability as well), which is not a luxury that many more traditional retailers can afford. And yes, they are masterful at supply chain management and logistics, not to mention dynamic pricing.

However, there is one area that Amazon is absolutely terrible at: content. Here’s an example: a search for “Levi’s 501 jeans women” turned up these options:

Screen Shot 2016-08-17 at 9.03.28 PM

Three different listings of what appears to be the same product, two on models but one not, some price variation which is unclear so I have to click on each one individually to determine the details, and three different product ratings scores with each picture. In addition, that famous “customers who bought this also bought” feature does not offer me complementary products to this outfit, but this:

Suggestions Amazon for 501 Levis Jeans

A top, or a pair of shoes that look good with this style of jeans? Nope: another pair of jeans in another style, and inexplicably a set of toy cars and garage.

Content, and product content, is one area where traditional retailers should be able to compete with Amazon with the bar set this low. Amazon offers the selection and low prices and free shipping (if you have Prime), but if you are looking for in-depth information, advice, and help narrowing your selection – what a good sales associate does at a physical store, or what some of the more successful online retailers have managed to transfer to the digital realm, Amazon is pretty lame.

So a word of advice to retailers who look at Amazon’s $17 billion in sales and think they can’t compete: consider if your online content management and product information can be improved. If you have an e-commerce platform from a vendor and are using the CMS that came with that platform, you may be selling your content short and not using it to its full potential.

My colleague Tim Walters further discusses how retailers can use data insights to ward off Amazon and other challengers in his recent report, “The Amazon Threat and the Facebook Trap: Retailers Can Win With Relevance in the Next Holiday Season.” If you are a retailer looking for guidance on how to use content or data for competitive advantage, contact us.




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