Report: Online growth continues at blistering pace
Online retailing is on an upward trajectory that shows no sign of slowing.
In fact, the segment is expected to grow at a compounded annual growth rate (CAGR) of close to 16% between 2017-2021, according to a research forecast from Technavio.
The market study covers the present scenario and growth prospects of the online retail market in the United States. When it comes to online devices, PCs, smartphones, and tablets comprise the three major segments — and PCs accounted for more than 42% of the market share in 2016.
With access to more devices, online sales during festive seasons and holidays have increased in recent years and are contributing to the growth of the market. Online holiday retail sales in the U.S. crossed $95 billion in 2016, an increase of over 12% compared to 2015. Offers such as free shipping and steep discounts have motivated U.S. consumers to make purchases online. Holiday sales through online retail during November and December amounted to over $55 billion in 2016.
Thanksgiving, Black Friday, and Cyber Monday are the days that see high amount of online shopping. Apparel, footwear and accessories, consumer electronics, computer hardware, and toys are the largest gaining product categories during the holiday season, the study said.
The other factors spurring online shopping is the increasing availability of easy and secure online payment options, facilities to track shipments, 24/7 customer support, and low costs. Customers can now also choose from a variety of payment methods including credit cards, cash-on-delivery (COD), Internet banking, demand drafts, and cash-on-order.
One of the popular methods of payment in the U.S. is COD. Many U.S. consumers are wary of sharing their debit or credit card details online, particularly with small and less well-known merchants. Consumers also rely on payment service providers such as PayPal, which allow them to pay without revealing card numbers, the study explained.
In addition, U.S. consumers are experiencing an increase in time poverty,” says Poonam Saini, a lead analyst at Technavio for retail goods and services research.
“Due to busy lifestyles, they find little time to fulfill their shopping needs and rely on online retailing to save time,” Saini said. “Most of these consumers also spend a significant amount of time at work and at home with access to Internet-enabled devices.”
In addition to convenience, value is the name of the online game. That said, free shipping has become the standard for many online retailers in the U.S. These retailers are also offering hassle-free return policies to attract customers.
Approximately 90% of online retailers in the U.S. offer free shipping and in-store pickup. Retailers like J.C. Penney, Target, and Toys “R” Us offer free shipping on all orders during holiday seasons. On similar lines, Walmart reduced its minimum purchase requirement for free shipping from $50 to $35, making 99% of the items sold by Walmart's online store eligible for free shipping.
“Convenient returns and exchange policies rank high in terms of importance to customers, as about 67% of consumers look at return policies before making a purchase,” says Saini.