Clothes (Online) Make the Man

The other day, there was a bunch of news coverage (here's the article in the Financial Times) of a  recently-released report from Shop.org about how consumers (in the U.S.) spent more in 2006 on clothes and accessories (e.g., shoes) than on computers and software.  Very interesting sign of the growing mainstream acceptance of internet retailing.

Ordinary people now outspend geeks on the internet.

Shop.org, part of the National Retail Federation and the commissioner of the report, estimated that clothing sales reached $18.3 Billion in 2006 compared with the $17.2 Billion spent on computers and related gear. The annual survey of eCcommerce (in the U.S.) found that online sales, excluding travel, rose 29 per cent to $146.5 Billion.

Analysts quoted in the various news articles about the report attributed the gains to several factors: (1) free delivery promotions, (2) generous return privileges (often free), (3) features that enhance the shopping experience (such as zoom, rotate, change colors easily) and (4) the inclusion of so-called community features such as user reviews, ratings, etc.

Not mentioned (that I saw) were other, important, but more secular, factors: (1) broadband penetration (at home, school and work) is now at a level that the online shopping experience is good for the mainstream consumer, (2) large numbers of shoppers are no longer afraid to use credit cards online (we forget, but there was a lot written in 1998-1999 about how eCommerce would never grow large because of the credit card fraud and theft problem) and (3) people are used to doing everything online now -- dating, buying a car, finding a job, etc., etc.

The report was not all upbeat.  A relatively high percentage of online shoppers (~97%) who make it to the home (or landing) pages of online shopping sites fail to consummate a purchase, including a high percentage of transactions that are abandoned even after online shopping baskets have been filled.

This is probably more of an opportunity than a problem, however.  Historically, (paper) catalogue shopping has been roughly 10% of the retail market in the U.S. (don't know the #'s for the rest of the world). Given the comfort level with ecommerce mentioned in the preceding paragraph, and the fact that the online shopping experience is far superior (even though it generates today's high abandonment rates) to that of catalogue shopping (particularly for younger shoppers -- witness my 19-year old and 21-year old), my bet is that there is a long way for eCommerce to continue to grow (especially as infrastructure in the rest of the world  improves).

This growth should accelerate as entrepreneurs find ways to mix entertainment with online shopping -- think "QVC-meets-Ebay-meets-Reality-TV-meets-Electronic Arts". This is an area we're looking at here at Mayfield.  If you have great ideas, let us know.