A September 25th report by Sanford C. Bernstein, based on consumer surveys and proprietary programming tools, states that e-commerce sales are up by a significant amount. Analysts state that this new trend could disrupt pricing and other aspects of the industry’s business model that have gone undisturbed for a long while. Online shopping has been quickly growing its share of the packaged-goods market, and analysts have recently come to acknowledge its potential to shift market share to smaller players in lieu of physical stores. In terms of pet care product sales alone, numbers are more than double what they were five years ago.
While e-commerce only accounts for about 1% of all sales for most of the packaged-goods industry, the Bernstein report estimates this number will rise to 25% within five to ten years. If that were to happen, online sales should reach roughly $222 billion.
According to the report, “E-commerce seems to be democratizing ‘shelf space’ as top brands do not dominate the e-commerce channel as much as they dominate brick-and-mortar retail.”
Amazon.com is said to be a main driver of this expected growth as the market shifts to give larger shares to online providers and taking away from brick and mortar stores. Online, however, prices of goods become less predictable, changing from day to day. Traditional providers of packaged goods tend to maintain a higher pricing stability due to a steady supply and demand, as well as more rigid customer expectations. Another reason that costs could fluctuate for goods purchased through e-commerce is that different needs are created by the practice. These include different package design and direct-to-consumer shipping.
How much of a dent in business e-commerce will create for already established stores remains to be seen. One thing is clear, however – online shopping isn’t going anywhere, and that is something the industry will just have to get used to.
Interested in e-commerce and direct-to-consumer delivery? Join us for Home Delivery World in Atlanta April 7-8, 2014.