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The Future of Spending: How E-commerce will Trump Store Profits

Posted on 25 August, 2014
The Future of Spending: How E-commerce will Trump Store Profits

Brick and mortar are out… e-commerce is in!

Although sales at traditional brick-and-mortar stores command the greatest share of sales and profits, growth in retail sales is much faster in the e-commerce arena. While e-commerce accounted for about 7% of all retail sales in 2013, that share is expected to grow to more than 10% by 2017. Changing consumer preferences, the widespread availability of Internet access through phones, tablets, and other handheld devices and lower prices through increased competition are all playing a role in the change.

The Profitability of E-commerce over Brick-and-Mortar Retail

E-retailers can operate more efficiently than brick-and-mortar retailers. Lower staffing requirements reduced overhead costs, and a lower rate of loss and fraud all contribute to the greater profitability of e-commerce retailers. E-Commerce retailers can be situated in areas with lower business taxes and in places where there are plenty of trained and experienced workers to perform order fulfillment and customer service.

Reasons for Slumping Store Profits

Shopping malls and other brick-and-mortar retail centers are not as popular among consumers as they used to be. Changing lifestyles, the hassle of getting to the shopping center, and the limited hours of the venue keep consumers away. The costs of staffing, rent, utilities and security all decrease same-store and overall profits.

Categories of E-commerce Growth

Several primary categories of goods account for the majority of growth in e-commerce compared to store profits on the same types of goods. Spending on digital books, magazines, movies, and music will account for the greatest amount of e-commerce growth. Other consumer goods with increasing e-commerce sales include computers and consumer electronics followed by apparel and accessories. Food and beverage have the slowest growth rate for e-commerce categories for personal spending.

As even the traditional brick-and-mortar stores’ holiday season of profitability sees steep declines in sales and profitability, retailers will have to modify their sales strategies to maintain the market share that they are used to enjoying. E-commerce retailers that make it easy and convenient for shoppers using their smartphones and tablets will enjoy the greatest increase in sales and profits as more than half of all transactions took place on these types of devices during 2013 and that trend is expected to continue rising.

Source:

New Stats: eCommerce As A Share Of U.S. Retail Sales

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