Retailers Benefits Don’t Necessarily Increase With E-commerce Spending

By February 08, 2012
Keywords : Smart city, America
taking a slice of the online cake

US retail e-commerce spending in Q4 2011 grew up from 14 percent compared to year ago, despite economical crisis. While the volume of transactions keeps increasing, does it really mean more benefits for online retailers?


ComScore recently released a report on U.S. retail e-commerce spending over Q4 2011. Despite a context of uncertainty regarding the U.S. economy, e-commerce spending increased up to $50 billion over this quarter, which represented a 14-point growth compared to last year. This growth was particularly boosted by certain products categories: digital content & subscriptions, jewellery and watches, consumer electronics, toys & hobbies, and computer software; all of which grew from at least 18% versus year ago. A growing part of online shopping was performed from smartphones and tablets, which are increasingly used to check prices and product features even while customers are physically in retail store.

Lower prices and convenience are driving e-commerce

According to comScore chairman Gian Fulgoni, “Price and convenience continue to be the critical value drivers for e-commerce, and unless those conditions change we can expect to see more channel-shifting to online in 2012 and perhaps even an acceleration in the current growth trend”. Especially in period of economic difficulty, customers are looking to purchase the best bargains online, and are very receptive to web deals. While consumers spend more money online, this doesn’t necessarily mean that retailers actually get many benefits from this increase in spending, especially since online spending seams to be highly related to deals and offers.

Free shipping growth questions online retailers’ benefits

ComScore also reports an increase of free shipping transaction, up to 52% over Q4 2011, which represents an all-time high. The previous high was in 2010 at 49%.  To what extent growth of free shipping will diminish online retailers margins and affect their bottom line remains to be determined. However, research shows that online spending significantly increases when retailers offer free shipping. ComScore chairman Gian Fulgoni highlighted this point in previous press release earlier this year: “What will remain unknown until retailers report their financial year and results is whether the aggressive pricing and free shipping offers came at the cost of lower margins”.



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