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Internet Commerce 2014: The Giant Awakens

  • October 2014
  • -
  • Frost & Sullivan
  • -
  • 17 pages

Summary

Table of Contents

Executive Summary

Internet commerce (or eCommerce)—that is, consumer retail transactions that take place over the Internet—has expanded over time until it now challenges conventional retail commerce, in scope, if not yet magnitude. Such transactions will very likely become a preferred method for obtaining durable goods and those items that do not require direct or in-person comparison shopping. In fact, it is possible to purchase just about any good, service or commodity over the Web right now.

Perhaps the most transformational aspect of Internet-based commerce, though, is the degree to which it is becoming integrated into conventional retail. People still like to frequent retail outlets, but, increasingly, they take the Internet with them on their smartphones. Access to online shopping sites and manufacturer’s Web sites allow for on-the-spot comparison shopping; or worse, from a retailer’s point of view, the loss of a sale.

Yet, as this market explodes, its impact on consumer lifestyle and the value that consumers place on communication services is also fundamentally changing. As our survey data disclose, consumers are now assessing the value of broadband access services based on the degree to which such services facilitate activities such as buying online.
Network operators have not yet taken the plunge into Internet commerce activities that they could. Although many players are expanding their subscription television offerings to include video marketplaces, operators still think of themselves primarily as the pipe over which retail transactions may occur. To use an analogy, they approach eCommerce as the builders of the roads that consumers can take to the shopping malls, rather than as the mall owners.

eCommerce represents a real opportunity for the consumer telecommunications sector, but will require a fundamental rethinking of market strategy by the telecommunication participants.

Introduction

Two hundred and fifty billion dollars ($ billion) worth of retail commerce flowed over the Internet in the US economy in 2013. By the end of this year, that number is likely to be in excess of $ billion. This is a staggering amount of commerce; and the projected rate of growth is in excess of % CAGR over the next five years. Clearly a sea change in consumer buying habits is occurring.

Yet, why is this growth happening now? Data suggest that we have reached an essential critical mass of broadband connectivity in the North American market; one which makes Internet commerce easy and accessible. Consumers, who are becoming ever more comfortable with life online, are discovering that making purchases in the virtual marketplace is easy and increasingly comprehensive.

This confluence of broadband accessibility and comfort with computer-assisted shopping is not only driving up retail sales online, but is also influencing conventional retail operations in interesting ways. Retailers are increasingly dependent on Web advertising and Web-enabled shopping tools to drive business. Many consumers now go to the mall armed with a smartphone and applications as varied as bar code readers and electronic coupons.

Although online security may be increasingly of concern to consumers, data show no indication that security is currently preventing Internet commerce. However, the data suggest that consumers are somewhat more concerned this year than they were last year. Since online retail operations fundamentally depend on credit and trust, this aspect of eCommerce will likely increase in importance.

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