The Top Product Categories for Retail E-Commerce Businesses
Overview
Online shopping is one of the most popular online activities worldwide – it is efficient, convenient, and cost-saving! Especially with the pandemic as a major catalyst, we’ve seen many businesses shift onto a virtual platform in order to cater to the shift in consumer behavioural towards online shopping. In 2019, retail e-commerce sales worldwide amounted to US $3.53 trillion and e-retail revenues are projected to grow to US $6.54 trillion in 2022.
Key Trends
Some trends in the e-commerce business we’ve seen in 2020 are:
i. Brands don’t need Amazon
Cracks are starting to appear through the previous impenetrable eCommerce conglomerate. The days of Amazon breaking into or simply breaking industries without supervision or oversight may be numbered. As anti-Amazon sentiment grows, talks of antitrust issues get louder and brands begin to question the value and cost of working with Amazon.
ii. Business are becoming more omnichannel retailers by using facial recognition and device tracking
Just as online retailers can understand the movement of users on their site, brick-and-mortar locations use WiFi, sensors, Radio Frequency Identification (RFID) beacons and more, physical retailers are bridging the gap between online and in-person data collection with cameras, facial recognition, tracking beacons, Point-of-Sale (POS) data and traditional digital measurement and analytics. The goal is to identify high-traffic areas in the store, overlooked products, dwell time – even product movement from rack to fitting room. Combined with web, mobile and social data, in-person data collection and analytics brings retailers much closer to a truly 360 degree customer experience.
iii. Fast & free shipping
2020 will be a tipping point for “fast and free shipping” as Amazon’s logistics and shipping business aims to disrupt the courier and postal industry; the eCommerce giant will move from client to competitor for virtually every major carrier. After the US Postal Service, UPS and FedEx, consumers can expect to see Amazon’s logo on vehicles delivering parcels.
iv. Rise of privacy by design and consumers choosing which brands can access their information
Consumers have been trading data for access (social media) and rewards (loyalty programs) for decades. Consumers know their data (in-store movement, online browsing, geo-location) is being used. And for the first time, they are coming to the bargaining table, ready to negotiate. Brands will move from trying to capture as much user data as possible to engaging in an exchange of value.
As the volume of personal data multiplies and as privacy awareness grows, a new type of service and options is expected to grow: privacy by design, privacy as an option and, interestingly, consumers getting “paid” to share their data. The challenge for brands and merchants will be to find the balance between acquiring, using and storing data while maintaining the “as much as we need and as little as possible” balance
Top Product Category
Apparel, Footwear & Accessories
- Segment is made up of popular goods to buy online because consumers can compare items and prices from many different retailers. As online shopping increases in popularity, clothing retailers have sought to increase their online sales by offering special discounts or items that cannot be found in stores and are only available for purchase online. Additionally, marketing and technology innovation has also helped drive sales. For example, J Crew uses a data-driven marketing approach to drive sales. As a result of retailers push to increase online sales, the apparel, footwear, and accessories segment has grown to account for an estimated 16.9% of total e-commerce industry revenue in 2020 in the US.
- In 2019, retail e-commerce revenues from apparel and accessories sales amounted to US $102.5 billion and are projected to increase to US$ 110.6 billion in 2020 and to US $153.6 billion in 2024. Globally, this market size is projected to reach more than $4 trillion by 2020 and the global market “shows no signs of slowing down.”
- In Canada, apparel (any) was the most popular online shopping categories among digital shoppers as of April 2019 with 62% buying from that product category while women apparel was the second most popular category with 42%. Men’s apparel was a close fourth with 32% with footwear at 30%.
i. Apparel
- The online apparel market size provided exclude fashion accessories, bags, and shoes as these segments were covered separately. In here, apparel is defined as clothing or garments and is a segment of the fashion industry.
- In 2017, the online apparel market was worth $49.97 billion in the United States and is expected to reach $70.91 billion by 2021, at a CAGR of 9.6%.
- According to a joint report released by BOF and McKinsey, global luxury fashion will record a growth rate of 4 to 5% by 2022.
ii. Footwear
- A typical percentage given is that only about 8% to 13% of shoes in the US are sold online, with 20% to 35% being returned due to reasons such as a poor fit. However, more recent studies suggest that e-commerce commands up to 24% of the $83.8 billion US footwear market, giving a total e-commerce footwear market size of $20.1 billion, plus most of the $1 billion shoe resale market.
- This market, according to Forbes, “has today emerged as a global, internet competition for these coveted shoes, with thousands sitting at their computers and phones, often equipped with several bots.” That is to say, the market is almost entirely online.
iii. Accessories
- In the U.S., the 2018 market for online fashion accessories is worth an estimated $21.5 billion. The year-over-year growth rate for this industry, 2017 to 2018, was 11.97%.
Toys & Games
- From sporting goods to hobby items, products in this category are easy to buy online, as these products are relatively basic and do not require much in-store research or inspection. Over the past five years, sales of these items have increased to 8.2% of US e-commerce industry revenue in 2020. (US $38.31bn)
- As of 2017, 39% preferred to purchase toys and games online while 37% preferred to purchase them in-store.
Home & Office
- Over the five years to 2020, sales of furniture and home appliances have increased to 15.1% of US e–commerce industry revenue (US $70.1bn) thanks to rebounding construction activity and housing start growth. Also, online shopping is making it easier for the growing urban populace to bring home large appliances by eliminating the hassle of renting a car or truck or needing to coordinate with third-party delivery services.
- In Canada, furniture and home furnishings sales are expected to account for 11.3% of total retail e-commerce sales in 2024, up from 10.3% in 2019.
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