Connected Consumer: Digital Commerce’s Impact by Industry
In the years to come, the world will become increasingly more connected. Over half of the world’s households will have access to the internet by 2020. Many of these connections will be driven by the fast rise of the smartphone with 51% of all mobile telephone subscriptions globally containing internet access by 2020. Greater digital connectivity equates to more opportunities for consumers to browse and buy both goods and services in digital channels. While the growth of digital commerce is a universal concept, digital has and will continue to manifest itself different depending upon the industry vertical and its level of digital maturity.
Travel continues to be most impacted by the connected consumer
Given the wide popularity of making all types of travel bookings online, the travel industry continues to be one of the industries most impacted by the connected consumer. In fact, Euromonitor International projects that 44% of all travel bookings in 2020 will unfold in the digital channel. In comparison, those figures stand at 11% for retailing and 7% for the foodservice industry.
Connected Consumer’s Impact by Industry
Online and mobile travel sales are expected to fuel a 4% CAGR in travel sales over 2015-2020, with CAGRs of 8% and 21%, respectively, in constant value terms. In fact, the rise of digital channels across the travel vertical is having a strong impact on company shares, with three online travel agencies, Expedia, Priceline and Ctrip, leading travel intermediaries in terms of value sales in 2015.
Mobile bookings, which include those sales made via mobile phones or tablets, continue to take the travel industry by storm. Countries such as China, South Korea and Sweden are moving full steam ahead, with mobile sales to residents as a percentage of online sales expected to be well above the global average of 25% in 2020, thanks to the connected populations in these markets. In China, an astounding 74% of online sales to residents are expected to be made through a mobile device in 2020.
Internet retail purchases expected to nearly double in next five years
In terms of absolute value gained from digital sales, retailing continues to be an industry worth watching. Euromonitor International estimates that US$1.75 trillion in retail purchases will be conducted over the internet in 2020, which amounts to an expansion of US$760 billion in five years. Of the expected internet purchases of physical goods made in 2020, approximately half are projected to be executed via mobile phones or tablet devices.
Growth in Select Internet Retailing Product Categories 2015-2020
Apparel and footwear will contribute the most in terms of absolute value sales across all product categories within the retailing industry. A decade ago, there was skepticism at the idea of selling clothes online. However, apparel is now one of the biggest growth stories within internet retailing. Start-ups like Grabble and social behemoths like Facebook and Twitter are helping to drive digital commerce in this sector. This category will be the industry’s key battleground over 2015-2020. The online appetite for apparel and footwear in China has grown especially rapidly and sales are now higher than in the US. This story will continue over the forecast period with China expected to contribute half of the absolute value growth for internet retailing purchases made for such products.
Foodservice online order becoming more common across all market types
As compared with the retailing and travel industries, the foodservice industry is just gaining its digitalfooting. Euromonitor International projects that online foodservice orders will expand at a CAGR of 17.3% for the 2015-2020 time period as compared with a growth of 2.5% for offline foodservice sales. In fact, the rise of digital has become a major theme in several of the industry’s major storylines. Digital has ushered in changes to the way restaurant outlets are designed, given rise to a new dining-out segment and paved the way for a long runway of future opportunities for growth and innovation.
Online ordering as a portion of total dining-out spending has been growing rapidly for many years, but a recent surge of innovation in online and mobile applications and platforms has accelerated this trend. In 2015, 4% of global foodservice value was spent via online ordering channels, up from just 2% in 2013. By 2020, this figure is expected to grow to 7%, placing the channel’s value at US$206 billion.
One of the most notable characteristics of this trend is that is somewhat universal across markets in various stages of chained foodservice development. By 2020, China will contribute over half of the world’s online ordering value despite a highly stratified economic population and a landscape that varies widely between urban centres and large rural areas. Even in a major developed market such as the US, the industry is just finding its digital way. Euromonitor International projects that consumer foodservice will be the leading industry in terms of remote payment total value growth asdigital innovators such as Domino’s and Starbucks offer examples of the potential for those with adigital-first strategy.
Importance of researching digital commerce opportunities
Even though digital commerce is a relatively new concept, it is taking root differently across various industries but also by countries. In the United Arab Emirates, for example, the greatest digital opportunities are driven by the more well-developed travel industry whereas Mexico’s forecast digital commerce expansion is expected to be carried by big-ticket purchases. The commonality across all countries and industry verticals is that digital commerce is growing rapidly. Determining what that growth means for a specific country or industry is the challenge and the inherent struggle with identifying the next digital commerce opportunity.
For additional analysis on this topic, please review the strategy briefing entitled, “The New Connected Consumer Code: Unlocking Digital Commerce Opportunities“.