E-Commerce Slowing, Internet Influence Growing

Here’s a story from Bob Tedeschi in today’s NY Times (also referenced in my Caliber post below) that shows e-commerce growth is slowing:

Since the inception of the Web, online commerce has enjoyed hypergrowth, with annual sales increasing more than 25 percent over all, and far more rapidly in many categories. But in the last year, growth has slowed sharply in major sectors like books, tickets and office supplies.

Growth in online sales has also dropped dramatically in diverse categories like health and beauty products, computer peripherals and pet supplies. Analysts say it is a turning point and growth will continue to slow through the decade.

This slowing should not be confused with the influence of the Internet on consumer purchase behavior, which is growing and will continue to grow (including in mobile). What we’re talking about here is the “location” of the transaction, which overwhelmingly will be in a local store today and in the future.

Here are a few of my past posts on the subject:

• Why Are E-Commerce Conversion Rates So Low?
• The Future of Online Shopping Is Offline
• Local Shopping: Why Are People Surprised?
• eMarketer Comes to Defense of eCommerce

What people are doing and will continue to do is use the Internet as a research tool and then buy in local stores. Of course, consumer purchase behavior is becoming more complicated, with more sources being consulted today than in the past. One dimension of this is that traditional media aren’t dead, but they’re diluted by the Internet. It equally means that, while highly influential, the Internet isn’t the alpha and omega of consumer shopping either.

Newspapers and yellow pages, as well as TV, still have plenty of strength — just nowhere near as much as they did in the past. All this means a lot more scrambling and confusion for advertisers and marketers, as well as consumers to some degree. As consumer choices and information sources continue to proliferate, consumers have more power and control — yes — but there are also many more headaches. (Travel is a perfect example of this.)

The reasons people buy things online have mainly to do with convenience and less with cost, although sometimes people will shop in local stores and buy things online to get a better price. The ultimate expression of that might be a car: I test drive locally and then buy from CarsDirect or eBay Motors. But overwhelmingly people continue to prefer local shopping for rational and non-rational reasons (e.g., it’s social, fun).

Think about Apple vs. Dell; Apple’s local retail strategy has soared while formerly e-tailer only Dell’s sales have soured. Indeed Dell just struck a deal with Wal-Mart to have in-store displays. Part of the success of Apple’s strategy has been the aesthetic and tactile nature of the stores (vs. online).

Those that can make the online-offline connection are poised over the long term to reap the benefits, whether it’s a search or shopping engine (Google, Yahoo, ShopLocal, Krillion, etc.), a traditional retailer (e.g., Target) or other consumer site (e.g., Citysearch, JudysBook).

Regardless, the dominant paradigm has emerged: online “shopping,” offline buying.