Zacks Industry Outlook Highlights: Facebook, Twitter, Amazon, eBay and Alibaba

For Immediate Release

Chicago, IL - July 15, 2016 - Today, Zacks Equity Research discusses eCommerce, Part 1, including Facebook ( FB ), Twitter ( TWTR ), Amazon ( AMZN ), eBay ( EBAY ) and Alibaba ( BABA ).

Industry: eCommerce, Part 1


The retail sector appears to be growing steadily, according to recent estimates from eMarketer. The research firm says that while retail sales grew 3.3% in 2015, it may be expected to grow 3.5% this year. The U.S. remains the largest retail market, but developing countries are growing pretty fast.

Ecommerce remains a fairly small part of total retail at just 7.1% of U.S. retail sales, but eMarketer is optimistic that the share will grow to 9.8% by 2019. Note that the share of ecommerce sales in total retail sales is relatively lower in the U.S./North America with Western Europe and Asia/Pacific already doing 7.5% and 10.2% of their purchases online.

As a reminder, data formats continue to vary widely, data collection and evaluation remain difficult, so reliance on surveys by government and private agencies remain relevant.

The U.S. Census Bureau says that the manufacturing sector is relatively more reliant on e-commerce (60.9% of their total shipments), followed by merchant wholesalers (27.7% of their total sales). These two segments make up the business-to-business (B2B) category.

Retailers and service providers generated just 6.4% and 3.8%, respectively of their revenues online, with retailers growing faster than service providers. The Bureau categorizes these two segments as business-to-consumer (B2C).

Manufacturers and retailers grew their business double-digits, while wholesale and services saw single-digit growth. [All the above data from the U.S. Census Bureau relate to 2014, as published in June 2016].

Government data indicates that retail ecommerce has outpaced total retail sales growth in recent times even in bad quarters for the sector. Some of this is on account of the continued shift from offline to online retail, as customers (baby boomers) move to online channels. But it's also because new consumers (millenials) often start out on online channels. These consumers spend more time in a connected, social environment and take for granted many of the online tools previous generations struggled to understand, appreciate and then adopt. Therefore, ecommerce will likely continue to outpace total retail sales in the foreseeable future.

Buyer Trends and Preferences

1. Mobile, Wearables : It just isn't possible to overstate the importance of mobile devices, and now wearables, as a factor driving ecommerce sales. eMarketer estimates that mobile commerce will be 32.0% of ecommerce sales and 2.6% of total retail sales in 2016. Smartphones in particular are seen as becoming a bigger driver, growing to 50% of mobile commerce next year and 53.5% by 2020. Forrester says that mobile devices don't just drive sales but also influence sales (it estimates that mobile influenced $1 trillion in 2015 sales). The strength continues to be driven by larger mobile screen sizes, new categories (cars, grocery, luxury that were earlier restricted to offline purchase) and greater comfort in using online payment systems. The increasing number of devices per person is leading to a trend of using multiple devices during the process of gathering information and buying a product and a tendency in many cases for the process to move from online to offline channels.

2. Social Networking : The traditional buying experience often involves friends or family getting together to look through merchandise and select after much discussion. The online experience has been more restrictive in this respect. Despite the fact that personal recommendations and comparison shopping have been around for a while, these are helpful in making a selection, but don't make buying a collaborative exercise. So the shopping experience has been more of a chore than fun. Once the novelty of doing things online wears off or for those who have been doing it online from the get-go, there will be a natural tendency to start looking for more, so this is where social networks like Facebook ( FB ) and Twitter ( TWTR ) will start playing a bigger role. Facebook has already announced Buy buttons and store fronts and more is sure to follow. Twitter has a Buy button as has Pinterest and Google Shopping.

3. Geography Isn't a Barrier Any More : These days, if people want to buy something they don't get at the retail store, the first thing they do is check online (or they might check online first and decide their point of pickup accordingly). So the world is getting ever smaller as shoppers see local, state, national and international barriers melt away. And satisfaction leads to higher demand and also, higher expectations.

Before going into the seller strategies, let's just touch upon prospects in the Chinese and Indian markets since they are likely to grow very strongly this year.


The general things the Chinese look for when shopping online are good service and high-quality products (especially if they are the fast-growing upper middle class and affluent customers in cities). But they also reportedly prefer online marketplaces rather than brand sites to avail of discounts, promos, payment options and choice. With the digital revolution in China, many Chinese also have multiple devices they use to research a product or shop on.

While China's economy has cast a shadow on retail sales expectations this year, findings of Boston Consulting Group and AliResearch (a part of Alibaba) say that China's consumer economy will expand by about half, to $6.5 trillion by 2020, even if annual real GDP growth cools to 5.5%. They identify three drivers: a growing upper middle and affluent class, a new generation (between 18 and 35 years of age) of freer spending and more tech-savvy consumers. Ecommerce will contribute 42% of total consumption with 90% of this coming from mobile. Services rather than goods will contribute 51% of the growth. Moreover, in a survey of 2,000 Chinese consumers just 7% said that stock market trends would affect their decision to spend, 8% also added housing market concerns but a whopping 35% said that rising incomes would be a greater influence on spending.

Cross-border trade is another driver, as Chinese youngsters are extremely brand conscious and like to buy foreign goods, especially if they're from the U.S., South Korea or Japan. The Chinese Ministry of Commerce says that cross-border transaction value will make up 20% of total Chinese foreign business and continue to grow at over 30% year.


According to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), ecommerce in India will grow 67% this year into a $38 billion market. This is 10x the size in 2009 when it was worth $3.8 billion.

The top drivers were stated to be the increasing Internet and mobile penetration, growing acceptability of online payments, favorable demographics, aggressive online discounts, wider choice and rising fuel price. Mobile platforms handled 78% of shopping queries in 2015 compared to 46% in 2013. Apparel, electronics, baby care, beauty & personal care and home furnishings were top categories in 2015, each growing strong double-digits. 26-35 year-olds constituted the biggest segment (52%), followed by the 18-25 year-olds (38%), 36-45 year-olds (8%) and 45-60 (2%). The male to female ratio of shoppers was 65%/35%.

Companies like Amazon ( AMZN ) and eBay ( EBAY ) in the U.S., Alibaba ( BABA ) in China, and Flipkart and Snapdeal in India have facilitated the ecommerce revolution so they are in many ways the benchmarks of success in the industry. Traditional retailers are adjusting their strategies studying the strengths and challenges these businesses have faced. But it's now apparent that everything that works for the big players may not be ideal for smaller ones, so some new strategies are also emerging.

Also, since ecommerce is basically a new way of doing an old thing, the challenges for the segment are both with respect to the traditional model and the new evolving one.

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