More than four in 10 large revenue distributors now report having some amount of e-commerce business, according to 2017 Counselor State of the Industry research set to be released next month. Further, these large distributors (annual sales of more than $1 million) say 24% of their total revenue comes through web-based channels. Among the reasons for the market shift: opportunity. Worldwide online shopping has hit $1.9 trillion, KPMG said, in its 2017 Global Online Consumer Report.
The company found an increase in the variety of items available to purchase online due to the convenience of direct shipping and delivery or immediate download. When consumers were asked what factors motivated them to buy online instead of going to an actual store, the top two reasons were flexibility and cost savings.
“As more advances in technology such as blockchain or payment apps emerge, the move to cashless societies will create new ways for retailers and online brands to offer benefits to customers,” Willy Kruh, global chair of consumer markets at KPMG, said in the report. “Banks and other payment technology providers, including credit card companies, need to be aware of these changes and join the game, or risk losing their leading positions.”
Currently, there is overall growth in e-commerce, but the growth projected for the near future will be driven by millennials. As they continue to enter the workforce, their online spending is expected to increase and surpass all other generations. Millennials are also increasingly end-buyer customers and the primary decision-makers as purchasers for their organizations.
The KPMG data shows that millennials are about 50% more likely than baby boomers to research a product by visiting a store or talking to friends/family. Price and promotions, product features and brand reputation were commonly identified as the top considerations when consumers make their final product choice. When deciding where and when to buy, consumers typically rely upon price and website preference as the deciding factors. Millennials are considerably more likely than older generations to choose a vendor based on price rather than website preference, perhaps because of their lower disposable incomes or comfort with online shopping in general.
In North America, 45% of the most recent purchases have come from an online-only retailer, 42% from a retailer’s website. The trend of baby boomers being more likely than younger generations to purchase products from an online-only retailer could potentially indicate a slowdown in that platform’s growth, KPMG said.
“As part of an integrated customer-centric business model, customers expect that goods can be delivered or picked up wherever they are located,” said Julio Hernandez, global customer lead at KPMG. “They want their orders consolidated, they want shipping bundled with service, and they want to be able to return things easily. In order to meet these growing demands, companies need either better distribution systems or partners that can do it better for them.”
The data shows that 52% of consumers cited their initial awareness of a product came from an offline source, while 59% cited one or more online channels. Millennials are often triggered to buy by online sources like social media, which has seen an increase in usage over the past year. Facebook remains the most popular social media platform in North America, but Instagram and Twitter are gaining popularity. WeChat and WhatsApp are free international texting and calling apps that are more common in China because regular U.S.-based social medial channels are not available.
The data also found that 92% of reviews from all consumers were found to be positive. The KPMG report attributes the overwhelming positivity to consumers subtly competing with their peers by publicly sharing their personal experiences and latest purchases.
Despite the rise of online shopping, Kruh said e-commerce still makes up a relatively small percentage of total retail spending. “Retailers’ brick and mortar strategies also need to evolve to continue to draw customers into their stores, and to compete with the online retailers opening their own physical outlets,” Kruh said. “Increasingly, we are seeing innovative marketing strategies, as well as new technologies such as smart shelves, robots, self-checkout and interactive and virtual reality, being deployed in stores as retailers strive to compete on all fronts.”
KPMG surveyed 18,430 people living in more than 50 countries for the report.