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E-commerce retailers invest more in online services

March 18, 2015

The world of e-commerce continues to get bigger. Consumers increasingly search online retailer catalogs for the best deals and forgo visiting brick and mortar stores. Target and Wal-Mart understand the importance of expanding in e-commerce, and, as a result, both retailers are making significant investments to grow their respective online businesses.

The world of e-commerce continues to get bigger. Consumers increasingly search online retailer catalogs for the best deals and forgo visiting brick and mortar stores. Target and Wal-Mart understand the importance of expanding in e-commerce, and, as a result, both retailers are making significant investments to grow their respective online businesses.

The e-commerce sector continues to grow
According to Koeppel Direct, online shopping generated strong revenue in many verticals. In 2014, clothing was responsible for $51 billion worth of sales, electronics generated $26 billion and online grocery shopping generated $16 billion. Other verticals that could be considered niche markets also did well, such as pet and baby products, with each category generating $4 billion, respectively. Adweek noted that e-commerce contributed 9 percent of all retail sales in 2014, amounting to $210.6 billion. By 2018, e-commerce is expected to represent 11 percent of all retail sales. 

Two retailers make moves to expand in e-commerce
Fortune reported that Target and Wal-Mart have been active trying to stay competitive in the e-commerce sector. Due to the dominance of Amazon in the space, the two large retailers continue to expand in the hope of capturing more market share and offering consumers better and faster e-commerce services. It seems that their efforts have not been in vain as digital sales at Target rose 40 percent, while Wal-Mart digital sales grew by 18 percent from the previous holiday quarter.

The media outlet also pointed out that Target announced last week that it would spend $1 billion this year improving its e-commerce capabilities. Similarly, Wal-Mart CEO Doug McMillon said the company would double its efforts to attract more online shoppers. Wal-Mart’s sales are four times greater than Target’s, and accordingly, the company will spend approximately $2 billion on e-commerce development this year. Both companies intend on offering customers same-day delivery in coming months.

Interestingly, in a survey by Cowen & Co, 2,500 customers at each retailer were questioned about their level of satisfaction. The survey found 81 percent of Target customers were satisfied, compared with 71 percent at Walmart. It seems that while Wal-Mart is much more sizable, it does not enjoy as much customer loyalty as the competition.

“Target’s more nimble size allows agility to drive sustainably higher online growth,” wrote Cowen analysts, according to Fortune.

Investment in technology makes a big difference in e-commerce
Adweek pointed out that mobile shopping is growing into its own sizable market segment, indicating that 34 percent of shoppers are scrolling through e-commerce catalogs while in stores. Also, 38 percent of consumers check availability of products on mobile devices when en route to stores. Most online shoppers look for lower prices, but a significant number shop online because they desire free shipping. Overall, one of the biggest reasons online shopping is appealing for consumers is the convenience it provides.

Fortune noted that Cowen analysts credit Target’s investment in I.T. as one of the reasons it will continue to experience healthy growth. Wal-Mart has a competitive advantage in terms of size and specialization, but, on a smaller scale, Target is more successful at winning customer loyalty.

“We believe that Target’s scale information technology investment, combined with a higher household income customers demographic will drive faster omni-channel transformation [than at Walmart,]” wrote Cowen analysts, reported the news source.

Ultimately, while Amazon will continue to be the king of e-commerce for the time being, it is evident by the recent moves by two of the U.S.’s biggest retailers, that online shopping is a constantly shifting landscape that can be anyone’s victory, if they choose.

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