THE FUTURE OF RETAIL 2016

BI Intelligence

Providing in-depth insight, data, and analysis of everything digital.

EVEN THOUGH E-COMMERCE MAY NOT SEEM LIKE MUCH

COMPARED TO IN-STORE RETAIL...
Overall US Retail Sales
E-Commerce

In-Store

$1,400
$1,200
Billions

$1,000
$800
$600
$400
$200
$0
Q1 2012

Q1 2013

Q1 2014

Q1 2015

Q1 2016
Source: US Census Bureau

NEARLY ALL GROWTH NOW COMES FROM ONLINE

SALES
US Retail Average Growth Rate During 1H 2016

16%

2%

Total retail

E-Commerce
Source: US Census Bureau

AND WHILE PURCHASES MADE ON DESKTOP REMAIN

STRONG AND STEADY

Billions

US E-Commerce Sales On Desktop

$90
$80
$70
$60
$50
$40
$30
$20
$10
$0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016
Source: comScore

ITS MOBILE COMMERCE THATS TAKING OFF

Billions

US E-Commerce Sales On Mobile

$18
$16
$14
$12
$10
$8
$6
$4
$2
$0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016
Source: comScore

SO WHATS DRIVING THIS GROWTH?

Source: Rawpixel, Shutterstock

CONSUMERS ARE GOING DIGITAL THE NUMBER OF ONLINE

SHOPPERS HAS GROWN NEARLY 20 MILLION SINCE 2015
Number Of US Online Shoppers In millions
224

208

Q1 2015

Q1 2016
Source: comScore

AND THEYRE SPENDING MORE THE AMOUNT OF

MONEY SPENT ONLINE GREW BY $7 BILLION
Online Spending By US Consumers In billions
$68

$61

Q1 2015

Q1 2016
Source: comScore

CONSUMERS ARE ALSO SHOPPING ONLINE MORE OFTEN THE

NUMBER OF ONLINE TRANSACTIONS HAS INCREASED BY 115 MILLION
SINCE 2015
US Online Transactions In millions
895

780

Q1 2015

Q1 2016
Source: comScore

MEDIA, SPORTING & HOBBY GOODS ARE LEADING THE

WAY IN THE SHIFT TO DIGITAL
Digitals Share Of US Retail Sales
Clothing & accessories
Health & personal care

60%

Electronics, appliances, computers

Food & beverage

40%

Furniture & home furnishings

Media, sporting & hobby goods

20%

2005

2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

0%

Source: US Census Bureau, BI Intelligence estimates

OVER HALF OF THESE SALES WILL OCCUR ONLINE IN 2016

Billions

US Sales Of Media, Sporting & Hobby Goods

$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
2005

In-Store

Digital
2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

Source: US Census Bureau, BI Intelligence estimates

THAT MEANS RETAILERS NEED TO GO ALL IN ON DIGITAL

Source: Random Retail, Flickr

THE STAKES ARE HIGH: THE SPORTS AUTHORITY COULDNT KEEP UP

AND FILED FOR BANKRUPTCY IN APRIL

Source: Mike Mozart, Flickr

ELECTRONICS HAS REMAINED STEADY

Digitals Share Of US Retail Sales
Clothing & accessories
Health & personal care

60%

Electronics, appliances, computers

50%

Food & beverage

Furniture & home furnishings

40%

Media, sporting & hobby goods

30%
20%
10%

2005

2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

0%

Source: US Census Bureau, BI Intelligence estimates

NEARLY ONE IN FOUR ELECTRONICS PURCHASES HAVE

BEEN MADE ONLINE EACH YEAR SINCE 2014
US Sales Of Electronics & Appliances
$120
$100
Billions

$80
$60

In-Store

$40
$20
$0
2005

Digital
2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

Source: US Census Bureau, BI Intelligence estimates

BEST BUY HAS BEEN CAPITALIZING ON THIS

Best Buy E-Commerce Sales In millions
$2,500

$1,950

$1,720

$2,000

$1,500

$1,000

$639

$581

$601

$673

$676

$709

$832

$835

$500

$0

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Source: Company filings

BUT AMAZON IS CHALLENGING BEST BUYS

DOMINANCE
US Consumer Electronics Market Share, By Retailer
Best Buy

Amazon

Apple

30%
25%
20%
15%
10%
5%
0%

2010

2011

2012

2013

2014

2015
Source: Deutsche Bank, Twice

DESPITE LOGISTICAL BARRIERS, CONSUMERS ARE ALSO

INTERESTED IN BUYING FURNITURE ONLINE
Digitals Share Of US Retail Sales
Clothing & accessories
Health & personal care

60%

Electronics, appliances, computers

50%

Food & beverage

Furniture & home furnishings

40%

Media, sporting & hobby goods

30%
20%
10%

2005

2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

0%

Source: US Census Bureau, BI Intelligence estimates

ONLINE FURNITURE SALES ARE RAPIDLY APPROACHING A QUARTER

OF THE TOTAL MARKET
US Sales Of Furniture
$180
$160
$140
Billions

$120
$100
$80
$60

In-Store

$40
$20
$0
2005

Digital
2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

Source: US Census Bureau, BI Intelligence estimates

WAYFAIR LAUNCHED AN AR APP CALLED WAYFAIRVIEW THAT LETS

SHOPPERS SEE HOW FURNITURE WOULD LOOK IN THEIR HOME

Source: Scott Lewis, Flickr

MOVES LIKE THIS MAY HELP WAYFAIR KEEP UP ITS RAPID GROWTH
SALES HAVE MORE THAN DOUBLED IN TWO YEARS
Wayfair E-Commerce Retail Revenue Growth
$800

Millions

$700
$600
$500

$200

Q4 2015

Q1 2016

$756

$545

$400
$300

$686

$712

$286

$347

$369

Q4 2014

Q1 2015

$440

$100
$0

Q3 2014

Q2 2015

Q3 2015

Q2 2016
Source: Company filings

ALTHOUGH APPAREL AND ACCESSORIES ARE SLOWER IN

THE SHIFT TO DIGITAL
Digitals Share Of US Retail Sales
Clothing & accessories
Health & personal care

60%

Electronics, appliances, computers

50%

Food & beverage

Furniture & home furnishings

40%

Media, sporting & hobby goods

30%
20%
10%

2005

2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

0%

Source: US Census Bureau, BI Intelligence estimates

ONE QUARTER OF PURCHASES OCCUR ONLINE

US Sales Of Apparel
$350
$300

Billions

$250
$200
$150

In-Store

$100
$50
$0
2005

Digital
2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

Source: US Census Bureau, BI Intelligence estimates

ACCOUNTING FOR NEARLY $80 BILLION IN ONLINE SALES

US E-Commerce Sales, By Category
Clothing & accessories

$80

Media, sporting & hobby goods

Furniture & home furnishings

$60

Electronics, appliances, computers

$40

Food & beverage

Billions

Health & personal care

$20

2005

2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

$0

Source: US Census Bureau, BI Intelligence estimates

E-COMMERCE WILL ACCOUNT FOR 8% OF ALL HEALTH

AND PERSONAL CARE ITEMS SOLD THIS YEAR
US Sales Of Health & Personal Care Products
$350
$300

Billions

$250
$200
$150
In-Store

$100
$50
$0
2005

Digital
2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

Source: US Census Bureau, BI Intelligence estimates

AND SUBSCRIPTION SERVICES ARE CAPITALIZING ON CONSUMERS

NEED TO STOCK UP ON THESE PRODUCTS

Source: Sean Locke Photography, Shutterstock

BUYING THESE FREQUENTLY PURCHASED ITEMS ONLINE ELIMINATES

IN-STORE FRUSTRATIONS

Source: Gemenacom, Shutterstock

IN JULY 2016, SUBSCRIPTION-BASED COMPANY DOLLAR SHAVE CLUB

WAS ACQUIRED BY UNILEVER FOR $1 BILLION

Source: Dollar Shave Club

AMAZON IS THE MOST POPULAR E-COMMERCE DESTINATION FOR

EVERYDAY GOODS LIKE HEALTH AND BEAUTY PRODUCTS
Monthly US Visitors To Online CPG Shopping Destinations In thousands, 2015
175,094

Amazon
81,919

Walmart
Target
Kroger

50,843
7,844

Safeway

3,377

SuperValu

2,982

Albertsons

910
Source: comScore

AND HIGH-END CONSUMERS ARE FLOCKING TO THE E-COMMERCE

GIANT IN GREATER NUMBERS
Affluent US Consumer Behavior On Amazon 2015
Affluent consumers (HHI $75,000+)

Upper affluent consumers (HHI $250,000+)

Top 1% consumers (HHI $500,000+)

Think Amazon is better than other stores

Buy from Amazon once a month or more often

Have bought from Amazon in the past 12 months

71%

58%

67%

73%

66%

70%

83%

72%

62%
Source: Shullman Research Center

AMAZONS RECCURRING ORDER CAPABILITIES

ARE POPULAR
Amazon Subscribe & Save Growth As Part Of Total CPG E-Commerce Year-OverYear Sales Growth 2015

22%

20%

YoY growth
Source: 1010data

AND AMAZONS 2015 LAUNCH OF THE DASH BUTTON MADE

REORDERING HOUSEHOLD GOODS AS EASY AS PUSHING A BUTTON

Source: Amazon

BUT GROCERIES ARE THE BIGGEST OPPORTUNITY

IN E-COMMERCE
Digitals Share Of US Retail Sales
Clothing & accessories
Health & personal care

60%

Electronics, appliances, computers

Food & beverage

40%

Furniture & home furnishings

Media, sporting & hobby goods

20%

2005

2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

0%

Source: US Census Bureau, BI Intelligence estimates

EVEN THOUGH ONLY 2% OF ALL GROCERY SALES WILL TAKE PLACE

ONLINE

Billions

US Grocery E-Commerce Sales

$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
2005

2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

Source: US Census Bureau, BI Intelligence estimates

AMERICANS WILL SPEND OVER $700 BILLION TOTAL ON GROCERIES

IN 2016
Total US Sales Of Grocery
$800
$700

Billions

$600
$500
$400
$300
$200
$100
$0
2005

2006

2007

2008

2009

2010

2011

2012

2013 E2014 E2015 E2016

Source: US Census Bureau, BI Intelligence estimates

DESPITE CONSUMER CONCERNS OVER BUYING PERISHABLES

ONLINE
SURVEY: Why Dont You Shop Online For Groceries? US, 2015
I like to select my own fruits & vegetables
I like to touch, smell, and see what I'm buying
I want to take advantage of special in-store deals
I have the Hme to go grocery shopping
I shop with a parHal list and by browsing the
I use a lot of coupons
I can nd the products I want in-store
I use grocery shopping to get out of the house
Ordering groceries online is more eort than it's
I enjoy talking with people in the store
I prefer to buy groceries at certain stores
It's too expensive
I haven't received any special oers
I'm not very tech savvy
Buying anything online scares me

19%
17%
14%
13%
12%
10%
9%
7%
6%
6%

33%
29%

39%

49%

59%

Source: Brick Meets Click

CONSUMERS OF ALL AGES HAVE SHOWN INTEREST

US Shoppers That Have Bought Groceries Online
2014
37%

2015

34%
28%

25%

7%

18-24

32%

11%
5%
25-34

35-44

7%

45-54

25%

6%

55-64

7%

65 and older
Source: AT Kearney

INSTACART WILL PROCESS $600 MILLION IN ONLINE ORDERS IN 2016

Instacart Annual Sales Handled
$700
$600
$400
$300

Millions

$500

$200
$100
2012

2013

2014

P2015

$0
E2016
Source: BI Intelligence estimates

NOW LETS SEE HOW E-COMMERCE MASS MERCHANTS ARE

PERFORMING THE RETAILERS THAT SELL ALL OF THESE PRODUCTS

Source: Tookapic; Pexels

AMAZON HAS BEEN THE BIGGEST BENEFICIARY OF

E-COMMERCE'S GROWTH
Amazon Global Retail Revenue In billions ($)
YoY Growth

100%

$30,000

$25
$25,000

$20
$17

$20,000

$13

$15,000

$10,000

$7

$8

$8

$10 $10 $11

$13 $13 $13

$15

$16 $17

$20 $21

60%
40%
20%

$5,000

$0

Q1 2012

80%

Q1 2013

Q1 2014

Q1 2015

Q1 2016

0%

Source: Company filings

AND DESPITE A SLOWDOWN IN GROWTH, EBAYS GROSS

MERCHANDISE VOLUME HAS REMAINED FAIRLY STEADY
eBay Global Gross Merchandise Volume In billions ($); Ex-auto
YoY Growth
$25,000

$20,000

$16 $16 $16

$19 $18 $18 $18

$21
$21
$21 $20 $20
$20 $20
$20 $20 $19
$20

15%
10%

$15,000

5%

$10,000

0%

$5,000

$0

Q1 2012

20%

Q1 2013

Q1 2014

Q1 2015

Q1 2016

-5%

Source: Company filings

BUT LEGACY BIG-BOX RETAILERS ARE STILL STRUGGLING

TO SUCCESSFULLY SHIFT TO DIGITAL

Source: SFIO CRACHO, Shutterstock

WALMARTS E-COMMERCE SALES HAVE BEEN SUFFERING

Walmart Global E-Commerce Sales Year-Over-Year Growth
30%
25%
20%
15%
10%
5%
0%

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Source: Company filings

AND LESS THAN 5% OF TARGETS TOTAL SALES COME

FROM E-COMMERCE
Target E-Commerce Sales
E-commerce as % of total sales
$1,200

$1,081

10%

9%

Millions

$1,000

8%

$800
$600

7%

$479

$471

$463

$400
$200
$0

3%

3%

$567
5%

3%

6%

$534

5%

4%

4%

3%

3%

2%

1%

0%

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016
Source: Company filings

RETAILERS NEED TO EMBRACE MULTIPLE CHANNELS TO

REACH CONSUMERS

Source: Tanay Mondal, Flickr

SHOPPERS THAT ENGAGE WITH RETAILERS ON MULTIPLE CHANNELS

MAKE PURCHASES MORE OFTEN
SURVEY: How often do you make purchases from your favorite retailers
website?
49%

21%

25%

Once a week or more

Number of channels engaged

1-4 5-9 10+

28%

32%

36%

52%
43%

14%

At least once a month, less than

once a week

Less than once a month

Source: Fluent

AND SOCIAL MEDIA IS ONE OF THE MOST IMPORTANT CHANNELS

US Shoppers That Tried A New Brand Or Product, By Digital Tool Influencer 2015
Retailer social
Brand social
Daily deal sites
Friend social
Product reviews
Mobile payment
Brand texts
Shopping apps
Brand emails
Mobile coupons
Brand websites
Retailer emails
Search engines
Retailer websites

11%

15%
15%
14%
13%

18%
18%
17%
17%

23%
22%
21%

29%
28%

Source: Epsilon

BECAUSE DESPITE E-COMMERCES SMALL PORTION OF

TOTAL RETAIL SALES
Overall US Retail Sales
E-Commerce

In-Store

$1,400
$1,200
Billions

$1,000
$800
$600
$400
$200
$0
Q1 2012

Q1 2013

Q1 2014

Q1 2015

Q1 2016
Source: US Census Bureau

IT IS CONTINUALLY DRIVING GROWTH IN THE TOTAL

MARKET
US Retail Average Growth Rate During 1H 2016

16%

2%

Total retail

E-Commerce
Source: US Census Bureau

MAKING IT IMPORTANT TO STRADDLE THE DIVIDE BETWEEN

PHYSICAL AND DIGITAL RETAIL

Source: Andrey_Popov, Shutterstock

YOUNGER CONSUMERS HAVE A SUSTAINING INTEREST IN

IN-STORE RETAIL
US Teens Time Spent In Shopping Channels
Online-only retailers
85%

15%

90%

82%

18%

10%

Physical retailers with online stores

89%

87%

13%

11%

87%

13%

86%

14%

86%

14%

Fall 2012 Spring 2013 Fall 2013 Spring 2014 Fall 2014 Spring 2015 Fall 2015 Spring 2016
Source: Piper Jaffray

AND 65% OF MILLENNIALS USE THEIR SMARTPHONE WHILE

SHOPPING IN-STORE
US Millennial Smartphone Behaviors When Shopping 2016
Use smartphones while waiting in line to make
a purchase

65%

Use a smartphone in store to search for a

discount or coupon

53%

Use a smartphone to look at product reviews

while shopping in store
Use a smartphone to pay for an in-store
purchase

34%
14%

Source: Alliance Data

BEACONS ARE ONE OF THE BEST WAYS TO LEVERAGE

THIS IN-STORE BEHAVIOR

Source: Estimote

BEACONS COMMUNICATE WITH IN-STORE SHOPPERS

SMARTPHONE APPS VIA BLUETOOTH

Source: Estimote

AND HAVE THE POTENTIAL TO DRIVE UP IN-STORE SALES

Percentage Of US CPG Sales* Influenced By Beacon-Triggered Messages
Actual vs. addressable, 2016

98%
2%
Actual beaconized
sales
$8 billion
*Total US CPG market = $407 billion

**Based on the requirements to be beacon receptive

87%

13%
Addressable CPG
sales**
$35 billion

Source: BI Intelligence estimates

TARGETS CARTWHEEL MOBILE APP LEVERAGES BEACONS

TO PUSHES PROMOTIONS TO SHOPPERS

Source: Mike Mozart, Flickr

TARGET SHOPPERS HAVE SAVED OVER $275 MILLION IN

COUPONS AND DISCOUNTS THROUGH CARTWHEEL
Number Of Target Cartwheel Mobile App Downloads In millions
18

Source: Target

BEACONS HAVE BEEN ADOPTED BY A NUMBER OF

TOP CPG RETAILERS

Source: Mike Mozart; Shaggy Paul, Flickr

CLICK AND COLLECT IS ANOTHER CROSS-CHANNEL STRATEGY THAT

ALLOWS SHOPPERS TO PICK UP ONLINE ORDERS IN-STORE

Source: Nejron Photo, Shutterstock

ONLINE SHOPPERS ARE QUICKLY ADOPTING THIS METHOD, WHICH

MADE UP ONE-THIRD OF SAMS CLUBS ONLINE SALES IN 2015
Percentage of Online Sales That Are Click and Collect, By Retailer 2015
30%

Sam's Club
Kmart

23%

Toys R Us

15%
12%

Best Buy
9%

Home Depot

8%

Walmart
7%

Target
Bloomingdale's

3%
Source: Slice Intelligence

IN ADDITION TO BEACONS, CVS HAS ROLLED OUT

CLICK AND COLLECT
CVS Net Revenue In billions
YoY growth
$50,000

$45,000

$40,000

$35,000

$33

$35

$35

$37

$36

$37

$39

$41

$43

$44

50%
40%
30%

$30,000

$25,000

20%

$20,000

$15,000

10%

$10,000

$5,000

$0

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

0%

Source: Mike Kalasnik, Flickr

EVEN E-COMMERCE GIANT AMAZON OPENED ITS FIRST-EVER BRICKAND-MORTAR LOCATION AS IT GOES OMNICHANNEL

Source: Amazon

THE RISE OF ONLINE SHOPPING WILL INCREASINGLY BLUR THE LINES

BETWEEN DIGITAL AND PHYSICAL RETAIL

MAKING OMNICHANNEL STRATEGIES NECESSARY FOR BOTH LEGACY

RETAILERS AND NEW ENTRANTS

Source: gpointstudio, Pexels

MEET THE BI INTELLIGENCE E-COMMERCE TEAM

Evan Bakker
Senior Research
Analyst

Nancee Halpin
Research Analyst