Mary Meeker: Room for Growth in Online Retail
Mary Meeker, famed Internet analyst for Morgan Stanley, delivered a powerful presentation on Technology/Internet Trends at this week's Web 2.0 Summit in San Francisco. While she kicked off with a vivid depiction of just how brutal the economy is right now, Mary detailed several key trends that should provide accelerated success once the world breaks out of its recessionary doldrums. Good news for you in ecommerce. She sees room for growth in online retail and tells us why.
Consumers need value more than ever
The key catalyst for online shopping is of course the consumer. Right now, most everyone is tightening their belts and that certainly pressures the retail sales - online and offline. However, one should look at how the tough times impact purchase behaviors rather than just focus on the shrinking wallet size. There is huge opportunity to provide unique value and to establish your brand so that business can flourish at the end of the recession. Or as Mary says,
Companies with cogent business models that provide consumer value should survive/thrive - consumers need value more than they have needed it in a long time... and the Internet should be the best place to find it.
Room to Grow by Gaining Share
The overall pie may be shrinking, but ecommerce is poised to be a much bigger slice. According to Forrester Research's The State of Retailing Online 2008, online penetration into the entire US retail market is just 6%. Logic follows that there is significant room to grow share as consumers search online to find value (not just bargains).
Break things down into categories and you see upside in several really big categories. Home furnishings, cosmetics, OTC medecine, and sporting goods are among major segments where less than 10% of sales are online. Poor Fluffy - pet supplies come in at a paltry 4%. Check out slide #40 of the presentation (see below) for the full category breakdown.
Follow the Amazon Way to Value
So how does an online retailer do it? Mary points to everyone's favorite benchmark, Amazon, as the leader in providing value, maximizing sales, and grabbing more and more share. I cannot possibly go through the entire ecommerce 101, 201, and 301 lessons that we can learn from Amazon and other stellar online retailers. But it all starts with the consumer and delivering value to them.
When consumers are looking closely at their spending, they look heavily at price. Sure, you have to make sure you can be found based on that criteria. However, shoppers now actively put a dollar value on other factors - like transportation, one-stop convenience, shipping costs, and return policies. You have to consider that total cost into the value you provide. With that approach, you should not only survive this difficult economy but should be able to springboard when times are good again.
Check out Mary Meeker's presentation.