eCommerce is the fastest growing retail channel in North America as buying on the Internet is becoming more and more appealing to consumers. However, not all customers feel comfortable buying online compared to physically buying in traditional stores.
A study from Allurent, an eCommerce platform provider who released a Merchandising Survey in September 2006 gives us some insight into the buying habits of online customers in the US.
For many companies, defining an online strategy is still very challenging. In order to be successful they need to fully understand how their businesses can benefit from eCommerce (or eBusiness for that matter) and to be able to assess what it takes to implement their strategy.
Companies are usually hesitant to move ahead because they don’t have all the information they require to measure the financial and organizational implications of eCommerce. It is critical for them to be able to evaluate the total cost of ownership (TCO) of their eCommerce architecture as well as the return on investment (ROI) for their business.
I’ve spent hours looking for trustworthy sources of information in order to give you the low down on online customers and their buying potential. I’ve found more behavioral information on Canadians than on US citizens but I believe that the trends are fairly similar.
I’m not stating anything new by saying that “understanding your market is key in defining your business strategy”.
Here are some figures for North American Internet Users that I borrow from eMarketer.com‘s “Online Climate Change in Canada” article:
A crucial question for many retail business owners is: “but how will I know I can make money by doing eCommerce?”
Generating revenue on the Internet is linked to the concept of “converting your online visitors to becoming online buyers”. The keyword here is “converting”.
Conversion is critical for any online business strategy. It is probably the most important online Key Performance Indicators (KPI) for any decision maker.
Your focus should always be on converting visitors into revenue-generating customers. Whether they buy products with an online shopping cart, or just click on an online Ad; online revenue is linked to online conversion.
Fortunately for us, there are some conversion rates for eCommerce that we can use as valuable indicators.
OK so all the big guys (with the big guns) are selling online. But what about the small players? And what about the future new players, the eCommerce entrepreneurs? Do they stand a chance? How do the Davids of this eCommerce era fair?
Something interesting (even surprising to some perhaps) happened in 2006 in the US eCommerce market:
“The 100 smallest retailers in the Internet Retailer 2007 Top 500 Guide outperformed the Top 100 in web sales increases, growing by 23% and 19% respectively. The industry average growth rate remained at 25%, compared to growth for all Top 500 companies at 21.3%. “
See “Smaller retailers boast biggest growth in 2007 Top 500” article for more info.
What does this really mean?
It basically says that smaller businesses are selling online and are competing with the big boys. More than that, they’re outperforming them! And if they’re competing, that means that they’re taking market shares, and we’re talking shares of a $100+ billion market.
Even though a bit dated the “eCommerce” buzzword is still around and it is growing in awareness. eCommerce has however evolved from just describing the fact of “selling online” into a billion dollar market. eCommerce is not just a website with a shopping cart anymore, it is the “fastest retail sales channel” in the USA.
Here are a few dazzling figures that I borrowed from InternetRetailer.com and the 2007 edition of the Top 500 Guide:
