Seasonal Trends in US Ecommerce Sales and Prediction for 2013 to be $2011 Billion

Seasonal Trends in US Ecommerce Sales and Prediction for 2013 to be $2011 Billion

On the 7th of February comScore produced the retail commerce numbers for 2012 (ref: http://www.comscore.com/Insights/Press_Releases/2013/2/comScore_Reports_186.2_Billion_in_Full_Year_2012_U.S._Retail_E-Commerce_Spending) which makes good reading for eCommerce retailers with The Next Web headling 'comScore retail commerce hit 186.2bh in 2012 thanks to 15% growth the strongest since before the recession (ref: http://thenextweb.com/insider/2013/02/07/comscore-retail-e-commerce-hit-186-2b-in-2012-thanks-to-15-growth-the-strongest-since-before-the-recession/).

I like numbers. I might not believe them but I trust them more than a headline so I've had a look at these numbers and went back even further to quarterly figures from comScore from 2007 (ref: http://www.comscore.com/Insights/Press_Releases/2013/2/comScore_Reports_186.2_Billion_in_Full_Year_2012_U.S._Retail_E-Commerce_Spending). Analysing these numbers (and checking the figures along the way) a pattern can be seen. 

NOTE: I've predicted the 2013 numbers

From the simple graph above the yearly trend is as expected with Q4 showing a spike and the other Q showing less interest. If you add up the Q for 2012 you get the number that TNW report - $186.2Bn.

Based on this trend I simply took the difference between the Qs for 2011 to 2012 and added them up to get 2013. Its a crass bit of mathematics but I'm busy and it gives a prediction of $210.8Bn. A lot of money and do you want to know the weird think - its very likely under valued.

Quarterly Differences and Yearly Differences

When look at any numbers its good to see and use the raw data. So if we take the difference between each Q from 2007 to 2012 we get the numbers in the comScore report. 

This shows all Q are growing but Q4 is growing the least suggesting that this quarter may have either already peaked and is its showing no percentage increase from the pervious year. Comparing Q is very interesting but what the comScore doesn't do is compare years - adding up all those Qs. I've done it here are this is why my estimation is likely to be wrong (excuse the layout - I'm just trying to suggest the trend.

On this graph my prediction of 210Bn is likely to off as I've not taken into account the compound growth in Q1-Q3. If you were to take this trendline what you the new number be? I need to work out the rough details but in the order of $230Bn may not to be too far off

Numbers below

Period	Ecom Spend $M	YOY Change	Difference from previous Q	Actual Diff Prev Q	% Q YOY Change/old	Year totals	Actual Diff Prev Year	% Total YOY	% Increase
Q1 2007	27,970	17%	NA	NA
Q2 2007	27,176	23%	NA	NA
Q3 2007	28,441	23%	NA	NA
Q4 2007	39,132	19%	NA	NA		122,719
Q1 2008	31,178	11%	3,208	3208	11.47%
Q2 2008	30,581	13%	3,405	3405	12.53%
Q3 2008	30,274	6%	1,833	1833	6.44%
Q4 2008	38,071	-3%	-1,061	-1061	-2.71%	130,104	7,385	6.02%	6.02%
Q1 2009	31,031	0%	-147	-147	-0.47%
Q2 2009	30,169	-1%	-412	-412	-1.35%
Q3 2009	29,552	-2%	-722	-722	-2.38%
Q4 2009	39,045	3%	974	974	2.56%	129,797	-307	-0.24%	-6.25%
Q1 2010	33,984	10%	2,953	2953	9.52%
Q2 2010	32,942	9%	2,773	2773	9.19%
Q3 2010	32,133	9%	2,581	2581	8.73%
Q4 2010	43,432	11%	4,387	4387	11.24%	142,491	12,694	9.78%	10.02%
Q1 2011	38,002	12%	4,018	4018	11.82%
Q2 2011	37,501	14%	4,559	4559	13.84%
Q3 2011	36,308	13%	4,175	4175	12.99%
Q4 2011	49,698	14%	6,266	6266	14.43%	161,509	19,018	13.35%	3.57%
Q1 2012	44,282	17%	6,280	6280	16.53%
Q2 2012	43,153	15%	5,652	5652	15.07%
Q3 2012	41,936	15%	5,628	5628	15.50%
Q4 2012	56,781	14%	7,083	7083	14.25%	186,152	24,643	15.26%	1.91%
Q1 2013	50,562	14%	6,280	6280	14.18%
Q2 2013	48,805	13%	5,652	5652	13.10%
Q3 2013	47,564	13%	5,628	5628	13.42%
Q4 2013	63,864	12%	7,083	7083	12.47%	210,795	24,643	13.24%	-2.02%

UK Shopping Centre Map and Data

They'll love me when I'm gone

Since its the New Year and there doesn't seem to be much news around at the moment the shocking, yet commonly predicted collapse of HMV, Jessops and Blockbuster has made many headlines with the the reason behind their collapse was the move of customers to buying on line. There is little doubt that for products these firms were offering either had moved to digital distribution (music, film) or were brand heavy price sensitive where price transparency was a problem. The Internet was killing the High Street stripping it much loved brands such as Woolworths or HMV where an older generation had fond memories. Soon the High Street with the local baker, butcher and pub would soon to all gone.

Coming to a City or Major Road Junction Near You

However talk is cheap and analysis is hard and boring - numbers, dates and stuff are hard to read through. I argue the main reason why stores are struggling is through a severe lack in demand along with a shift away from shopping in towns but to large shopping centres or retail parks and big box retailers found of a motorway junction from you.

Adult Parks

Retail parks and leisure parks are for the casual shopper; they contain shops that sell things you generally can walk away with (clothes, jewellery, food etc) along with anchor stores that if you wished to buy an oversized TV or fridge can supplier a touch-feely experience. Metrocentre, Trafford Centre , Bluewater or the latest Westfield development where looking good to buy clothes to make you look good is the aim.

Big Boxes

Big box is for the boring stuff (depending on gender) - food, furniture, sofas, carpets and curtains. IKEA, BnQ, Homebase, for the stuff you can't eat. Sainsbury's Tesco, Asda for the stuff you can.

This is all very interesting but where is the proof that Town centres are being migrated? Well I've taken the top 20 shopping centres from wikipedia (http://en.wikipedia.org/wiki/List_of_the_largest_shopping_centres_in_the_United_Kingdom_by_size) and place them on a map. You will notice that it labels most of the big cities Great Britain (Northern Ireland didn't make it) so to add further detail I've added info about all the town centres to show when they were opened, size, visitors etc. (I don't currently have the numbers for the big box stores)

link - top 20 UK Shopping centres: https://maps.google.co.uk/maps/ms?msa=0&msid=207558842850008730121.0004d44bb2336aad46067

Taking the top 20 and ordering by open time the biggest shopping centres were open to the public from 1990 onwards with the largest European shopping centre Metrocentre just missing out but it has grown significantly since it opened in 1984.

Rank	Name	Town/city and county	Region	Opened	Extension	No of Stores	Anchor Tennants	Floors	Size (m²)	Annual visitors	Website
1st	MetroCentre	Gateshead, Tyne and Wear	North East England	Oct-86		340	6	2	194,400[1]	23 million[2]	http://www.metrocentre-gateshead.co.uk
2nd	Trafford Centre	Trafford, Greater Manchester	North West England	Sep-98		280	6	4	185,100[3]	35 million+ (2010)[4]	http://www.traffordcentre.co.uk/
3rd	Westfield Stratford City	Stratford, London	Greater London	Sep-11		300	3	3	175,000[5]	no data	http://uk.westfield.com/stratfordcity/
4th	Bluewater	Dartford, Kent	South East England	Mar-99		330	3	2	155,700[6]	27 million (2010)[7]	http://www.bluewater.co.uk/
5th	Westfield London	Shepherd's Bush, London	Greater London	Oct-08		270	5	5	149,461[8]	23 million (2009)[9]	http://uk.westfield.com/london/
6th	Westfield Merry Hill	Dudley, West Midlands	West Midlands	Dec-85		309	7	2	140,800[10]	23.5 million[11]	http://www.westfield.com/merryhill/
7th	Meadowhall	Sheffield, South Yorkshire	Yorkshire and the Humber	Sep-90		280	10	2	139,355[12]	25 million[13]	http://meadowhall.co.uk/
8th	Lakeside	Thurrock, Essex	South East England	Oct-90		245	4	3	133,780[14]	25 million[15]	http://www.lakeside.uk.com/
9th	St. David's	Cardiff, Wales	Wales	May-82	Oct-09	203	5	3	130,100[14]	38 million (2011/2012)	http://www.stdavidscardiff.com/
10th=	Liverpool One	Liverpool, Merseyside	North West	May-08		169	2	2	130,060[16]	24.6 million (2010)[17]	http://www.liverpool-one.com/
10th=	Manchester Arndale	Manchester, Greater Manchester	North West England	Jan-75	Jan-03	210	7	3	130,060[18]	41 million (2012)[19]	http://www.manchesterarndale.com/
12th	Bullring	Birmingham, West Midlands	West Midlands	Sep-03		160	2	3	127,100,[20]	40 million (2011)[21]	http://www.bullring.co.uk/
13th	Eldon Square	Newcastle, Tyne and Wear	North East England	Jan-77		150	4	2	125,419[14]	36 million	http://www.eldon-square.co.uk
14th	thecentre:mk	Milton Keynes, Buckinghamshire	South East	Sep-79		260	4	1	120,773[22]	27 million (2010)[23]	http://www.thecentremk.com/
15th	Westfield Derby	Derby, Derbyshire	East Midlands	Sep-75	Jan-07	199	6	3	106,130[24]	25 million (2010)[25]	http://uk.westfield.com/derby/
16th	Whitgift	Croydon, London	Greater London	Oct-70	Planning	no data	no data	2	111,000[26]	no data	http://www.thewhitgiftcroydon.co.uk
17th	East Kilbride Shopping Centre	East Kilbride, Lanarkshire	Scotland	no data		no data	no data	no data	106,030[27]	no data	http://www.shopek.co.uk
18th	Highcross	Leicester	East Midlands	Jan-91	Sep-08	135	3	2	105,000[20]	18.5 million (2009–10)[28]	http://www.highcrossleicester.com/
19th	Kingfisher	Redditch, Worcestershire	West Midlands	Jan-76		250	2	3	102,000[29]	no data	http://www.kingfishershopping.com/home
20th	Telford Shopping Centre	Telford, Shropshire	West Midlands	Jan-73		175	6	1	100,000[30]	no data	http://www.telfordshopping.co.uk/

So you changed data into information but its still boring. The key here is for many of these retail parks are based either in cities or in favourable areas to by car - Bluewater being a good example. To support this large stores a lot of people need to go through them and this done with anchor stores - department stores: Selfridges, John Lewis, House of Fraser etc. This removes the demand from the town High Street leaving it to those that can't travel easily who tend to be from a poorer demographic.

Growing Pains - Phoenix Sleeping

Therefore if you are looking to restore the fortunes of your local high street several things have to change that focusses around transport. Market forces and human instinct mean this is unlikely therefore it is highly likely the High Street is going to have to go through a further period of decline before a new shops appear that offer an experience that people want.

Real Media Strikes Back

Much has been said about the demise of HMV and Blockbuster recently with the Internet front and centre as cause and motive due to the manner in which it allows digitisation and transportation of information which is what these two companies trade: information be that music or movies its all the same in the world of IT. Does this mean that any business that trades in physical products that store information (music, videos even print) is ultimately doomed and will be sucked into the Internet black hole with a brand left hang over the store door? Not necessarily but it is going to require strategic supply-chain cooperation (SSCC) and a new model to succeed with the current power brokers having to give a little ground to remain powerful, profitable and relevant.

Milk and Monopolies - power in the supply chain

HMV and Blockbuster were a bit like Tesco or Asda or Sainsbury's are today but for HMV and Blockbuster it was the 1980s early 1990s. Why? They both had massive buying power and with that negotiation and with this control on profit margins. Today the supermarkets have massive control of their supply chain dictating to producers the terms and conditions of sale (milk story part I: Price Fixing 1:http://www.theweek.co.uk/business/3185/oft-fines-supermarkets-£50m-milk-price-fixing). This power isn't reserved for the retailer at the end of chain. Wholesalers and other intermediates have also controlled pricing and access (milk story part II: milk monopolies: http://www.independent.co.uk/news/business/milk-monopoly-crumbles-1482028.html).

Power brokers and Barriers to Entry

So what has the price for a pint of milk have to do with restoring entertainment retailers back to some form of stability? The answer is in cooperation through the supply chain to protect all parties from exposure and its part of game theory used in negotiations: my enemy's enemy is my friend (http://www.gametheorystrategies.com/2011/08/23/my-enemys-enemy-is-my-friend/). By cooperating along up and down the supply chain businesses can protect themselves from being forced into competing on price. Once a business is competing on price its already dead - there is no competitive advantage its in strategic hell (http://highered.mcgraw-hill.com/sites/0077107063/student_view0/chapter5/) and ready to picked off by the lowest price which the Internet company model is designed to make the most of. SSCC is based on one the strategic gurus (he'll hate that description) Michael Porter's five forces model where 5 market forces act on a company: Vertically 1) threat of new entrants and 2) Product substitutions taking power away from the internal competition between current market players who are fighting amongst themselves (3) and horizontally 4 ) suppliers to the businesses and 5) customers who buy the products. The Internet acts primarily down the vertical - to succeed against it barriers to entry must be put up to stop this power of competition taking away from the horizontal.

Don't fear the Cannibals

When the Internet was first being mentioned as a new method for business it was ignored as another fab with a fear that if a company, like HMV, invested in an online offering it would decrease the turnover in store - cannibalising its own businesses. Here no barriers were setup until the Internet with fantastic distribution (Amazon) or complementary products (Apple iPod, Apple App Store) (6 Porter forces that gets forgotten as it was added later) were already in and where setting the agenda.

A firm that is having to adjust to cannibalisation is Love Film (Amazon firm). When it began it offered DVD to be posted to homes. Now it is having to adjust to offering a Internet streaming version to compete with BlinkBox (Tesco) and its old rival netflix and Sky Now TV with Virgin Media probably looking to add to the party.

Physical Fight with Virtual backup

Now its time for a fight back stores like HMV and even Blockbuster can offer better products than their competition today including the recent streaming film channels mentioned before - how? physical media (DVD and CDs etc) with online streaming access. Now this is not a new idea - BlinkBox already offer UltraViolet (Which? FAQs: http://www.which.co.uk/technology/tv-and-dvd/reviews-ns/what-is-ultraviolet/) which allows a physical DVD to be stored on the cloud (Internet for the layman) allowing the film to be shared. But its too timid. The offer is very limited and not bold enough - if music makers and film producers don't want to buying milk from Apple and Amazon in the next five years then they need to cooperate on this otherwise their will be no physical products which allow for greater profit margin. People like to have 'stuff' - they also want it on the Internet as a backup (Apple iCloud again) and to allow access not restricted to the one physical product.

To do this the horizontal supply chain film studios -> film distributors -> retailers has to offer, in store, a virtual copy - in perpetuity, an online version of the product which can be accessed via a web browser add is designed to be viewed on multiple devices - not just a hulking great file that would never stream. It should be possible for a customer to walk into HMV look at on a nice big screen the latest James Bond movie, pick it up, scan it, pay for it and walk out knowing that her online account now had the film safely stored. This could be done for music and even print - pick up your paper and its available in our print folder on your laptop/phone/tablet and can be shared with the family back home in near real time. Up and coming technology such as NFC where the phone can detect and connect products will further enhance the shopping experience allowing upsales - having bought SkyFall the customer can be offered GoldenEye of Austin Powers at a discount or an offer on cinema tickets; products that enhance the instore experience that the customer would get online (instore IT architecture required which I'll cover in another article focussing on the Apple Store).

Watch out for the Conglomerate

There are a few problems with SSCC and that's control. In an ideal world all players would be independent and largely they are. However 20th Century Fox is owned by News International who in turn own Sky and many publications. They may not want to play. However the human desire to read of paper, have a physical copy of a film or album is alive and kicking and if the players along the horizontal can create standard infrastructure it may be possible for the High Street music store to starting swinging at its Internet competitors before the 10 count.

John
BlueOak_

UK Shopper Numbers - watch the numbers

Headlines are powerful things these days where news is faster than ever coming from multiple sources. However its always good to look at the detail of a report to make sure the distance you jump in making conclusions isn't as great. For an example the BBC - Shopper numbers fell in December, says the BRC.

First off the BRC are the British Retail Consortium who represent British retailers (as one would expect). Its always helpful to know the source of the info.

Second the headline is a summary of all the data and so the headline is a summary statement. In reality some parts of the country are doing (Scotland, London and Northern Ireland) and others not (Wales, East of England).

Third - data is presented as percentage increases/decreases.

Taking the second and third point a few questions arise. What were the actual numbers, not the percentages? The answer would show if the real number of shoppers has either dropped or moved - an increase in London by 1% and a decrease in Wales by 1% does not cancel each other out due to the population (starting data) differences.

The next point of order is terminology. Helen Dickinson - director general of the BRC talks of 'difficulties in many or our town centres'. If you look at the specifics from the BRC themselves http://www.brc.org.uk/brc_news_detail.asp?id=2372&kCat=&kData=1 the decrease on the High Street was the least affected (Shopping centres reported the greatest fall (-2.8%), followed by out-of-town (-1.0%) and high street (-0.5%) locations.)

 The devil is the detail but people love a quick headline.

John
BlueOak_

The UK High Street, ecommerce and the Internet - a short history

Much is being stated about the state of the UK High Street over the last couple of days mainly due to the news that HMV, Jessops  and Blockbusters have all applied for administration. The cause of these well known brands failing tends to be over simplified with the rise in the "Internet" being front and centre for finger wagging. The truth (according to research and data) is the High Street (defined as a set a shops located in a town centre) has been in decline for over 10 years. Here I briefly respond to a comment on consultancy (http://econsultancy.com/uk/blog/61903-the-high-street-needs-to-innovate-or-die?utm_medium=feeds&utm_source=blog).

The changes that have shaped the UK (and other countries) High Streets started in the late 1970s with changes to planning law that allowed large stores to move out of the constraints of the central business district (CBD) to locations 'out of town' OOT. The reason for the change was due to the impact of the car and mass manufacturing from overseas. Technology of the barcode and first ERP systems drove this further and faster with positive feedback in place: supermarket moves OOT dropping the spend on the HS and decreasing the footfall. Reduced footfall pushes other retails to locate out of town reducing footfall further. Today we have very large shopping centres all being built OTT to facilitate the customers and the retail lorries.

The second big change was the barcode. The barcode allowed retailers to change pricing dynamically which previously they had to separately price items as by law the price of an item must to clearly shown. The knock on effect was the way customers checked out - till operators simply scanned items reducing error rates. It also cut down the risk to a retail of returning items to the producer.

Third the credit [debit] card. The CC allowed for customers to pay for items without the need for cash. With the barcode and the credit card - electronic commerce was born - without the Internet :).

From this point late 1990s customers had already moved away from the traditional High Street of once of week from a selection of stores. OOT shopping centres and mega supermarkets dominated outside major cities (which have good transport links).

When the Internet did turn up at its second attempt it came with friends. By 2003 when the debris on the Dot.Com bubble had been cleared up it came with a solid infrastructure back bone (no more dial up); globalised products and brands; connected and mobile users (phones) and house hold brands that worked: eBay and Amazon surviving today as retail market places and Apple - a new store for digital goods.

HS retailers ignored the Internet fearing it would cannibalise its in store sales. They were also protected by continuous growth by cheap credit for both themselves and customers. This all ended in 2009 when the banking world collapsed. Everything was reversed with credit now being very expensive.

Stores had expanded both the size, number and amount of stock in stores. Stores and to renegotiate rents were in big trouble and many were forced out. Those that could had to implement new supply chain strategies responding the customer demand - compare Zara with Marks & Spencer.

Eventually major brands offered a competitive shopping model which worked. The example of Waterstone's is a brilliant example of not multichannel but multi-monochannel where marketing channels do not talk to themselves and staff don't have the authority to meet customer needs.

John Lewis, Debenhams and major stores are very successful as they have the right operational setup. If you look at the figures from the footfall figures for the UK for December big stores in big towns/cities grew - not shrink - more people are going through the stores. However look at the numbers out side the South East and big towns- smaller, possibly less well off areas, are shrinking. This points to an economic turn down rather than a shopping experience.

The next phase is how stores use mobile technology to complement internal (supply chain) and external (customers) operations. The Apple store does this brilliant and urge people to see how it works.

So in summary the High Street as people like to remember in probably died 10 years ago - it just didn't know it. The big question is a) does it matter - who cares? b) what will people do about it?

John

BlueOak_