“At the Front Door of the world of Commerce”
by Mark C. Layton – copyright 2012 all rights reserved
Recent US Department of Commerce (DOC) data shows the challenges that many major US Department stores, once the darlings of the industry, are now facing as consumer shopping behaviors change. While 2010 Department stores sales fell (see chart below), DOC data shows that eCommerce sales in the USA grew over 14% during that same period to approximately $170B or something north of 4% of total retail sales.
Forrester Research released data in early 2010 showing that one of the fastest growing segments of the web commerce industry in 2008 was the manufacturer to consumer direct segment. While I don’t have the benefit of fresh 2010 data on this topic yet, I’m pretty certain that when those numbers do become available we are going to see this trend continuing to accelerate not only in 2010, but for the foreseeable future.
So what’s going on? Why are consumers turning to manufacturer sites more and more often to source their purchases? Here’s what I am seeing from my perspective inside the front door of the web.
First, its my opinion that traditional retail has continued to poorly embrace the wealth of rich content media that manufacturers make available for their products. System attribute limitations, lack of resources to massage the information into acceptable formats for their websites and just the sheer mass of products that major retailers offer make it a daunting task to tackle and as a result, most have simply darted around the issue.
Second, retailers are making decisions for their own financial agenda and as a result have reduced the range of a manufacturer’s line that they stock in their retail stores as well as on their own web store fronts. While this has generally resulted in healthier retail inventory situations, improved gross selling margins and less end of season close out challenges, the consumer is seeing an ever decreasing piece of a manufacturer’s offer both in styles, colors and sizes.
The consumer is a smart cat and what I’ve seen over the past few years is a growing reliance on the use of the manufacturers direct web site because the consumer has come to expect that it will be the best source of information of products (style, size, color) that the manufacturer has to offer. And once the consumer is in the manufacturer web store, converting them to a buyer is only a few clicks away, and increasingly that is trend.
It’s interesting that product price is generally not the key decision point driving the growth trends that the manufacturer D2C segment is experiencing. Convenience, brand experience and access to an in-stock offering of the full range of a manufacturer’s products seem to trump all.
It’s a conundrum that traditional retail needs to quickly digest, if for nothing more than to save it’s own web commerce market share.
See you soon, “At the front door of the world of commerce”.