Jan 11, 2019
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Weekly Insights October 21 2016

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FROM THE DESK OF DEBORAH WEINSWIG

US Holiday Preview: Three Online Trends to Watch

Our global research teams are in the middle of preparing our holiday 2016 reports: keep an eye out for our upcoming US retail outlook and our holiday themes report, among others. In this week’s note, we draw on our research to showcase three online shopping trends that we think will impact US retail this holiday season.  
  • The New Christmas Market
This year, more consumers will cut out the retailer and buy direct from brands or other types of sellers on online marketplaces. This channel is much bigger than just eBay; big names from the world of conventional retail, such as Amazon and Walmart, also operate major online marketplaces. Amazon is likely to become a majority marketplace in the second half of this year, as measured by share of units sold, and third-party sellers are expected to sell more units on Amazon’s site than Amazon does itself. The company’s marketplace offering has received a recent boost via improvements to its ePacket small-and-light-delivery program, which helps Chinese merchants ship directly to US shoppers. Amazon Prime members in the US can now get their orders from China in just five days versus eight previously. Meanwhile, Walmart is growing its marketplace by bringing new sellers on board. And it has acquired Jet.com, thereby adding Jet’s 14.8 million product listings, 210 million unique visitors and US$1.2 billion product sales run rate (as of August 2016) to its business.
  • Online Grocery Will Grow Fast
We expect online grocery sales to accelerate this holiday season. Consumers will buy more turkeys, cranberry sauce and stuffing online than ever before as a result of Walmart, Kroger and others ramping up their e-grocery services. Walmart and Kroger are now each offering pickup services at around 400 locations, while Target, Whole Foods Market and Publix are each either partnering with, or at least trialing, third-party delivery service Instacart. AmazonFresh is fighting back by lowering its fees from $299 per year to $14.99 per month. E-commerce is still a nascent channel for grocery in the US: according to Kantar Worldpanel, just 1.4% of all US sales of fast-moving consumer goods were made online in June 2016. Yet that figure represents a near doubling of share in just two years, and we expect the full-service offerings from major grocery chains to drive up the number of shoppers using e-commerce for bulk grocery purchases at a time of year when they are looking for convenience.
  • Prime Shopping Time
Almost half of American households will have an Amazon Prime membership by this holiday season. The core benefit, as most readers likely already know, is two-day delivery at no additional cost, but additional benefits include Prime Now two-hour delivery in some areas and access to AmazonFresh where it is offered. In September, financial services firm Cowen and Company estimated that 44% of US households were Prime members. Cowen further estimated that US Prime memberships could climb by fully 12 million across 2016. Even if this figure is merely in the right ballpark, that is a lot of extra holiday shoppers who are likely to take advantage of their Prime benefits to save money and effort in a busy season. Prime members spend more with Amazon than do non-Prime customers—$1,100 per year versus $600 for nonmembers, according to Consumer Intelligence Research Partners. Prime members also convert to a sale more often, on average, than do nonmembers. Acting as a magnet for up to half of all American consumers, Prime will be the gift that keeps on giving for Amazon this festive season.  

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