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ShoppingIn my book, Net Attitude, I said we were 2% of the way into what the Internet has in store for our business and personal lives. In current speeches I have been saying 5%. There are various metrics one could look at to get an idea of the Internet’s penetration. The WordPOPClock projection is that the world’s population on March 1 will be 6.35 billion. The world’s Internet users at any point in time is somewhere around 5% of that number. More important than the numbers are the things you can and can’t yet do using the Internet. I believe that 95% of the desirable things that could be done on the Internet are not yet being done.
One of those things is purchasing of goods and services. It is getting easier every day but we have a long way to go. For 2003, online retail spending, excluding travel and auctions, grew 22% over 2002 to $52 billion. Including travel, the total was $93 billion, up 27% over 2002. These are impressive numbers and I expect we will continue to see double digit growth for quite some time. However, let’s put it in perspective with the "offline" world. Walmart just announced their sales for the last quarter — $74.9 billion. That equates to $832.2 million per day or $34.7million per hour. In two days, Walmart (one company) sales exceeded the sales of all companies online for 2003.
The data on retail sales is not up to the minute and I am not sure how accurate it is, but the total U.S. retail sales figure is somewhere around $4 trillion. That means that the 2003 online retail spending was roughly 2 percent of the total. No matter how you look at it, we are at the very beginning. The Web has grown to it’s infancy.
Why isn’t it 20% instead of 2% ? There are many reasons — only some of them not technology related. The number of people with “always on” Internet connections is a factor. Ease of use and concerns about security, identity theft, and privacy also contribute. I am opitmistic that these issues will be adequately addressed. As eBay and Amazon continue to grow and show real profits to the world, business leaders are paying more attention. The free markets will drive competition and then innovation will kick into high gear. We have barely scratched the surface of what is possible.
Why do people drive to Walmart and other retailers to buy things instead of buying it online? There are various reasons including social factors, habit, and a desire to touch and smell things. There are some things that we buy that don’t really need much touching or smelling though and I believe we will see the emergence of “fulfillment models” for them. Just as the online bridal registry has provided an alternative to the old way, so too will e-businesses that offer to fulfill your staple needs. If you were to analyze the grocery bags that you bring in from the car, how many items really needed discernment and how many were blindly grabbed from the shelves?
Paper towels, toilet paper, salt, flour, ketchup, potato chips, coffee, etc. are staple items. Webster says staple means “a commodity for which the demand is constant”. When you think about it, there are a lot of things in that category for many people. So if the staple items just “showed up” outside the door from UPS, we could save a lot of shopping time which we could then use to shop for things that require more time. At some point e-businesses will begin to offer fulfillment services and as we place things under that model, they will get to know the pattern and based on shipping costs, they will begin to suggest quantities of things that will save us money in addition to time. This kind of thing won’t be for everything nor for everybody but it will be one of the new models that will emerge that will cause the 2% to grow.
The other model I expect to see emerge is “order online and pick up locally”. Every needed a nut, bolt, gasket, fastener, or doodad on a Saturday afternoon and then spend the afternoon driving around from store to store trying to find it? I have. Wouldn’t it be nice to go to Radio Shack, True Value, or Pep Boys online and buy it and then print out the receipt along with a map to the nearest store that is open and has it in stock?
Footnote: The profits associated from the online sales are not reported to my knowledge. Walmart‘s profits were 3.6% of revenue or $2.7 billion. That equates to $30 million per day or $1.25 million per hour.
The glass is half full, not half empty. In the days ahead we will see many new capabilities on the Web and they will save us time — our most valuable but scarce asset.