Nick: Hi I’m Nick Rosato, Director of North
American Equity Research, coming to you live from New York City today. And it’s
back-to-school time so we’re happy to welcome Doug Anmuth, Internet Analyst for JPMorgan. So let’s start off with a quick overview of the state of retail
both online and offline. What you see, how each channel is growing, et cetera.
Doug: Absolutely, so when we think about the online and offline mix of retail today, a
little less than 15% or so is done online. We think the pace of growth there
is roughly in the mid-teens, so certainly a lot higher than the 2% or
so growth that we see in traditional retail. Wver time we think that total
e-commerce can hit 30% or higher of total retail sales. So still many years of
strong secular growth in our view. Nick: and what are the key drivers of retail going
online, and really what has been driving the growth over the past couple of years,
and going forward? Doug: yeah so key drivers, there are many. A few I would point to:
first is really convenience in selection, so really just making it a lot more
efficient for consumers to shop online versus in physical stores. I think also
having access to a lot more inventory– just broader a number of products than
you can actually fit in a physical store. The second thing I would point to is
mobile. So mobile right now is less than 30% of total e-commerce, and growing
significantly faster, so that is certainly a strong growth driver. The
other one is really — we continue to see heavy closings of physical retail stores,
and we think year to date we’ve seen about 2,000 store closings in the US.
It’s a faster pace than at this time a year ago, and that will continue to drive
people toward e-commerce. Nick: All right that’s that’s kind of stark for the retail
industry, but as we think about specifically online, what are the themes
you think will those drivers represent going forward? Doug: so a few key themes to think about. I think the first is marketplaces. You’re seeing more of a
mix between first party and third party marketplaces online, which really opens
up the e-commerce environment to a lot more sellers, gets them much more scale.
I think the second big thing we’re seeing is a omni-channel, where certainly e-commerce players want to sell across
different avenues. You’re seeing a bigger push from them also toward some physical stores as well. Certainly traditional retailers are doing a lot more online,
and from some of them you’re seeing some very strong growth rates. The third thing
I would point to is: we’re seeing a couple large categories that have been
somewhat under penetrated and a little bit slower to move in the past that are
getting a lot of attention now. Like grocery, for example, which is still only
a probably a low single-digit percentage online and there’s some pretty strong
efforts there to push that into e-commerce. Nick: interesting and how big a role are social platforms having in influencing online shopping? Doug: so social platforms are actually becoming pretty impactful, certainly an online
shopping. So when you think about social media today, about 70% of adults are using social media today, on average spending more than an hour of time per day. So
there’s potential to have real impact and influence here. We’re seeing a couple
platforms in particular that have done really an excellent job in terms of
allowing brands to target consumers very well. It’s actually creating a kind
of new environment for advertising, for brands to go directly to consumers,
bypass some of the more traditional channels, and and reach them in a pretty
cost-effective way. It’s certainly impacting purchases. Nick: and the roles of online and offline and continue to blur. Do you see more online-only stores
building physical presence, and will you see that over the next three to five
years? Doug: yes we do it’s a good… it’s a good point. I do think we’re gonna see those
lines blur more going forward from an online perspective. I think some of the
companies are realizing that in certain cases, for certain categories, they need
to have more of a physical presence. Some of those touch points. So for example we
do see that in grocery. That’s been a big push recently. And I think certainly
when you think about physical retailers, there’s a much bigger effort not just to
do online commerce, but to really drive the benefits
of buying online, picking up in store, driving fast delivery, using those that
store footprint to really you know hit a broader base of their consumers. Nick: it’s an interesting change in dynamic. So very quickly to wrap up, talk a little bit
about international markets and how they differ versus the U.S. in their drivers,
and and what we’re looking at. Doug: yeah, so international markets…
I think they the secular trends are broadly the same, but I think from market
to market, it differs quite a bit in terms of overall penetration rates. So
there are a few, for example, like South Korea and China where we would see 20%
plus penetration rates online. Also a couple large ones that are certainly
much earlier, like India and Indonesia, where it’s probably single-digit, but the
secular the secular trends are the same despite the fact you might have some
structural differences, some regulatory challenges in certain markets, but
overall trends are the same, and I think we’ll start to see some of those other
markets catch up more over time. Nick: certainly some interesting dynamics.
Thank you very much, Doug, and thank you for tuning in. For more information,
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