Industry Analysis of e-Commerce

by Proccese

The e-commerce market has changed the way business is transacted, whether in retail or business-to-business, locally or globally. Prior to the Internet, success in retail was said to hinge on location, location and location. Now, the Internet is a global marketplace, affording even the smallest retailer a national -- if not a global -- presence. Brick-and-mortar locations now have websites, and new companies now sell products that were unthinkable prior to the Internet and the boom in related technology. The scope of the e-commerce marketplace is difficult to measure. The e-commerce market has become such a vital part of the economy that is difficult to pinpoint exactly where e-commerce begins and the old world economy ends.

Online Retail

One of the largest segments of e-commerce is the online retail sector, which is dominated by the sale of consumer electronics, apparel and accessories. According to the U.S. Commerce Department, U.S. online retail sales during 2011 totaled roughly $194 billion. By 2013 this figure had increased to $262 billion, an increase of 13.4 percent over the prior year. Fifty retailers account for 80 percent of this market, and pure-play online retailers generally hold the advantage of speed and dynamics over brick-and-mortar brands that have expanded online. Consumers have become more sophisticated and online retail has become more competitive. Holiday sales account for a large portion of sales -- roughly $47 billion during 2013 -- and were up 10 percent over 2012 sales.

Digital Advertising

Advertisers are spending record amounts on digital advertising, including dominant brands that have partnered with e-commerce sites and outside logistics companies to expand online sales, to expand internationally, and to deliver products directly to consumers. As of the time of publication, in the U.S. digital advertising spending roughly equals spending on television advertising and is sure to overtake it. Internet ad revenues grew by 15.6 percent during the first quarter of 2013. Total domestic digital advertising equaled $109.7 billion, but the mobile market, which still accounts for only 3.7 percent of U.S. digital advertising, is growing at the fastest rate. Mobile advertising spending was up 81 percent during 2012, and is dominated by Google and Facebook along with their peer companies.

Business-to-Business

The business-to-business market in the U.S. is massive, recording sales of roughly $559 billion during 2013. Big players in the B2B market include networking and infrastructure companies such as Oracle Corporation, Cisco and Alcatel, as well as enterprise systems companies such as SAP and IBM. Other B2B segments are growing quickly, including B2B social networks and advertising, and cloud computing, a segment that includes industry heavyweights like Google and Amazon. One of the fastest growing B2B segments is the software-as-a-service market, a market pioneered by Salesforce.com, which is benefiting from corporate America’s desire to reduce tech spending along with the proliferation of cloud computing services.

Outlook

According to Forrester Research, online retail sales are projected to outpace brick-and-mortar sales for at least several years. At the time of publication, online retails sales were expected to reach $370 billion by 2017, boosted by expanding use of smartphones and tablets and also by increased investment by traditional retailers in expanding online sales. By 2015, mobile ad spending was expected to increase to $33.1 billion while total digital advertising spending was estimated to equal roughly $133 billion. Projections for mobile ad spending had it rising by 61 percent during 2014 and 53 percent during 2015