• Internet as a game-changer for business: some hard data
The following was previously posted as part of a running argument in the comments section on The Ad Contrarian. Having gone to the work of finding and putting together the statistics, I figured I might as well share them here as well. (First rule of a writer: recycle material whenever possible.)
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Has the internet “changed everything” to do with retail sales?
Since 1999, the Department of Congress (DOC) has been keeping figures for online sales separate from those for catalogue and mail order, making the tallies more accurate. From these we find that in 2000, total online retail sales accounted for 0.7% of the total $747.8 billion in retail sales.
To put that another way: in 2000, less than a penny from every consumer dollar was spent online.
By 2007, DOC figures show $36.2 billion in online sales compared to total retail sales of $1,030.7 billion, or roughly 3.5%. While this is an impressive gain for online sales (up to three and a half cents per dollar), it is still a tiny fraction of the total, and its previously steady gain has suffered severe drops in most key categories over the last year:
- When we look at MasterCard Advisors’ data for 2008 we find that compared to the same period the year before, the only areas that showed an increase in online spending were sport and fitness equipment (up 18%); video games, consoles and accessories (up 14%); and clothing (up 4%). The other top online product categories showed net declines: books and magazines (down 1%), computer hardware (down 8%), event tickets (down 18%), and even music, movies and videos (down 32%).
- Furthermore, we find a growing division in the demographic of online buyers. There was a 13% decline among households earning under $49,999, and an 8% decline among households earning under $100,000. The only gain was among households earning more than $100,000, who showed a 7% increase in online spending.
- Keep in mind too that because these data come from MasterCard purchases, it is reasonable to expect a naturally skew in favour of online purchases, since brick-and-mortar sales often employ cash.
However you look at it, the internet, while unquestionably adding another dimension to consumer shopping behaviour, has come far short of being truly game-changing. Certain segments have blossomed (online purchases of videos and movies have soared, putting companies like Blockbusters on the edge of bankruptcy), but the bulk of retail sales still occur in the presence of real human beings in real stores buying real merchandise.
Has it “changed everything” (even recognising the hyperbolic connotation in the phrase)? Hardly. It’s completely changed the nature of a few, select purchase categories; it’s significantly augmented a somewhat larger number of purchase categories, and left the bulk virtually unchanged.
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See Chuck Nyren's "King of Madison Avenue," about the new Ogilvy biography.