Despite the hype, e-commerce still only a small fragment of retail sales

A new analysis finds online sales are still just a tiny fraction of major retailers' income. But that doesn't diminish the importance of the online channel.
Written by Joe McKendrick, Contributing Writer

Considering the barrage of talk about the rise of e-commerce, one could be forgiven for thinking that bricks-and-mortar stores are a relic of a bygone era -- following many bookstores into oblivion. However, a new analysis by The Wall Street Journal finds online sales are still just a tiny fraction of major retailers' income.

E-commerce emptying the malls? Not yet, by a long shot. Photo credit: Joe McKendrick

"Amazon.com sells more online than its next 12 biggest competitors online, including Staples Inc. and Wal-Mart," report WSJ's Shelly Banjo and Paul Ziobro. While the top retailers talk a great deal about their online channel, mandatory disclosures to the U.S. Securities and Exchange Commission reveal a different, more muted story. At Wal-Mart, for example, "web-based sales contributed 0.1 to 0.2 percentage points to Wal-Mart's 2.4% increase in U.S. comparable-store sales in fiscal 2013 and 1.6% increase in fiscal 2012."

The latest data from the Census Bureau of the Department of Commerce estimates U.S. retail e-commerce sales for the second quarter of 2013 at about $64.8 billion, an increase of 4.9% from the first quarter of 2013. While $64 billion isn't chicken feed, it still only represents about 5.8% of total retail sales, which topped out at $1,126.2 billion in the most recent quarter.

The e-commerce channel, however, continues to grow at at a rate five times faster than retail overall, which rose 0.9% during the quarter.

This data raises a number of questions. First, how much are retailers' sales being disintermediated by other online channels? For example, would a buyer prefer to go directly to a manufacturers' site or Amazon to buy a clock radio, versus visiting Target.com? Whereas, they would be more likely to buy the product on-site at their nearby Target store if they were going that route. (As they say in retail -- location, location, location.) Plus, there are many things that people won't buy online yet -- such as dish liquid or contact lens solution.

For small specialized retailers, e-commerce is a lifeline -- it even extends their reach to a global base of buyers. But for larger retails with multiple channels, the picture is murky.

The larger question is how much cross-channel action is involved in sales? Perhaps a lot of online activity is simply browsing and product research, followed by trip to the physical store to look at, touch and feel the actual product.  As Target's Casey Cart put it in the WSJ article: "There's such a blurring of the lines that it doesn't make sense to delineate between whether it's an online or in-store sale."

This post was originally published on Smartplanet.com

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