I admit that I am one of those that do not want to be pushed and have to sweat in traditional retail stores. I much rather do my shopping at my laptop, have a cup of coffee by my side and enjoy the selection not just by looking at the product, but also looking at comparisons and reviews that are posted on the Internet.
According to Economist.com, last years online sales in America reached $188 Billion which is roughly 8% of total retail. Of this, Amazon.com did last year $48 Billion, so we are talking about a pretty sizable giant. Some even have concluded that it is Amazon.com that is killing the traditional retail. According to Economist article, retail sales is going to grow to $270 Billion by 2015. See chart below:
I do not have to even read any statistics to know that there is a tremendous change in consumer behavior. I just have to watch how my family behaves. My wife told me this Christmas that she tries to do everything online to avoid the traffic and crowds at malls. This was not the case in the past. Consumers where doubtful whether online was going to cut it and in many cases people avoided to even buy as they wanted to try out first. Today, you can ship everything back if you do not like it.
We used to spend lots of time in local Barnes&Nobles and also malls, but I can’t remember when I have done that. The only reason for me to go to a local Barnes&Noble is to meet a friend or business acquaintance for a meeting as they typically are adjunct or have a Starbucks cafeteria. I can get everything online when it comes to magazines and books and in fact what I have noticed is that bookstores do not even carry anymore their entire inventory as that is costly. The same thing is happening to BestBuy who has really struggled this year. CompUSA and Circuit City already want belly-up and these used to be places where I went on regular basis.
According to Jose Alvarez of Harvard Business School, traditional retailers with pricy products will probably lower their inventories and focus instead on big investments in showrooms while commoditized items should have large inventory and less flashy displays. This of course makes sense, but many retailers can’t afford maintaining inventory in ways that Amazon.com has.
Amazon has been pressured to charge sales tax in states where they have distribution centers (34 now and 15 in the workings). This year, every Texan has to pay same sales tax as any traditional retailer would charge and that has evened out the play for some local retailers. Other well-know electronics online retailers such as Newegg.com still do not charge anything in Texas, so if it is one-to-one, Amazon will loose as the sales tax adds to the bill.
It is going to be interesting to see how 2013 is going to play out in the online shopping space. I would expect smartphone shopping to increase and based on some research from Aegis Media Americans, by 2014, mobile internet will overtake desktop internet usage in shopping. Those are pretty radical numbers and we that work in the software space, need to keep in mind the behavioral change that is taking place also in respect to devices and how things are done.