Is the US ecommerce market nearing its long term penetration rate, as a percentage of total retail sales? ComScore recently released data indicating that ecommerce retail sales in the US grew by only 6% in Q3 2008, a meaningful dip from the growth rates seen earlier in the year and much lower than previous years’ growth. Additionally, Q2 data from the US Census seems to show that retail ecommerce in the US has flattened out at about 4% of the US retail sales total. (next graph is from the US Census pdf linked above.)
Some additional figures you might find scary (ComScore is source, again) Q3 2007 Year over Year online retail sales growth was 21%, vs the 6% Q3 quarter 2008.
Are we nearing a peak? Is this just reflecting the entire economic slowdown?
Regardless, the 3rd party analysts’ estimates of intense ecommerce retail growth need to be taken with a grain of salt. If you are starting an online business, you need to take a long, hard look at the third party market size estimates you read. Just because IDCGartnerForrsterEMarketer analyst XYZ says the online market for [insert your industry here] will be $10 billion in 2012 doesn’t mean you’ve got a bullet proof case for starting a business.
Besides doing some common sense brainstorming and back of the envelope calculations, talk to potential customers and other industry players before launching your business. Make sure the “onlineification” of your industry really makes sense based on customer need. There has to be a real pain point!
I’d hope that we are merely in a slowdown in retail ecommerce growth due to the current economic enviroment. Additionally, I’d have to imagine that certain verticals/industries will enjoy out-sized ecommerce growth rates over the coming years. Key industries mentioned in the ComScore report as having shrunk in Q3 ’08 are ones that would most likely be hit hard by a bad economy: Jewelry and Watches (down 11%) and toys and hobbies (down 3%). Others, such as Video Games (up 60%) and Event Tickets (up 18%) are seeing strong growth, likely driven by the adoption/acceptance of online as the new, preferred delivery channel.
