Stuart Nussbaum

Partner & Consumer Products Sector Leader

"Look at any business that has experienced sustainable success and you will see that they have evolved and adapted based on what they thought was needed in order to continue their path to prosperity. Digital brands are no different, in that to be long lived they will constantly adapt to changes in technology, costs and customer preferences."

1. The Backdrop

The United States of America (US), which stands as one of the largest and most diverse countries in the world, is a Federal Republic made up of 50 states, 1 federal district, 5 major self-governing territories and various possessions. One of its prime characteristics includes having great variety – both in the form of geographic topography (consisting of arid deserts, mountainous peaks etc.), as well as cultural heterogeneity that is driven by large-scale immigration. At present, it hosts a population of ~324.5 mn people (expected to grow by another 0.7% this year) over an area of 3,796,742 sq. km, which is unevenly divided into urban concentrations and uninhabited landscapes.


From 2014 to 2017, the US GDP increased from USD ~17.4 tn to ~USD 19.4 tn. It is expected to climb up to ~USD 20.4 tn in 2018, at a year-on-year growth of ~4.8%. On the demographic front, while a majority (~71.5%) of the population is under 55 years of age – with ~39.5% from 25-54 – the country also has a substantial aging population that makes up over 28.5% of the total. Unemployment is on a downward trend, taking meagre dips from being at 4.7% to 4.4% in 2016 and 2017 respectively; it is forecast to further drop to 3.9% this year. This scenario keeps young immigration up and running, which is necessary to not only curb the older class outnumbering other age groups in the years to come, but also to fuel new trends/developments from across the world. At present, much of these shifts are rooted in the era of digitalization, where the US's already strong internet user base of 88% of the population continues to grow at a rate of 1.2% annually. The country ranks 3rd on the Inclusive Internet Index, which outlines the current state of internet availability, affordability, relevance and readiness. People can easily go online and browse through relevant content in a user-friendly manner.

Logistically, the US ranks 14th on the LPI (Logistical Performance Index), reflecting a highly established

customs clearance process, trade and logistical services quality, as well as transport infrastructure. Its placement on the Ease of Doing Business and E-Government Development indices is also quite high, standing at 6th and 11th respectively. This showcases an entrepreneur-friendly business environment that is favorable for new entrants, coupled with an active stance towards investment in telecommunications, human capital and provision of online services. Keeping such focused practices in-tact is pivotal for maintaining an up-to-date institutional framework that encourages digital adoption.

On a macro level it is fair to say that the US, which has been one of the most developed nations on a global level till date, has never fallen short of adopting new trends and disruptive technologies. Its steady transition into digital markets has helped create a conducive environment where people can readily go the “e-way” for a multitude of activities. This largely includes consumer-centric industries such as retail, which have changed course by becoming integrated across electronic platforms. We have yet to see how quickly and how far American consumers are embedding these changes into daily life, along with assessing any impending gaps. It's been pertinent for over a decade now, understanding and facilitating this shift as e-retail unfolds a  new chapter every day.

2. The Busy Ecommerce Arena

Consumers are jumping on the ecommerce bandwagon in search of greater ease and convenience paired with a personalized shopping experience. The industry is expected to continue growing in response to needs of modern sellers and smart consumers.

The E-Purchase Frenzy

Digital transformation for businesses in the US has become more of a status quo than a trend, which is significantly taking over both B2B and B2C transactions. E-penetration has steadily grown by 6.9% over 2015-17 and is expected to jump by over 11% this year, reaching almost 250 mn people. The average spending per shopper has also increased by over 23.5% over the last two years and is forecast to reach USD 2,089 by 2018. A majority of these e-consumers shop at least once a month (32% shoppers as of March 2017), which is then followed by 29% who purchase at least once a week. A host of products are purchased online, ranging from personal tokenized items to household goods, fashion, entertainment, sports/fitness, software and much more. The Consumer Electronics product category leads the e-retail chart, generating a revenue of USD 53.6 bn in 2017. This is closely followed by Clothing with a turnover of USD 47.5 bn.

In terms of competition, while a variety of large marketplaces and smaller e-platforms have all cropped up to seize this opportunity, Amazon currently dominates the sphere in terms of ranking as the most popular retail website with 197 mn visitors. Concurrently, Amazon also shares the stage with eBay and Etsy for being one of the most talked about online marketplaces for e-sellers, with the three holding a rating of 6.23, 6.18 and 6.17 respectively. This growing network of both merchants and consumers will help these established players develop an even stronger footing over time. Meanwhile, the ecommerce platform has also become a hotbed for payment providers. US e-shoppers are making use of a plethora of e-payment mechanisms to suit their needs. While conventional credit cards are still the most popular, used by 62% of consumers, online payment options such as PayPal, Amazon Pay etc. are also close in line with an aggregate usage rate of 58%. This figure can further increase

as a greater number of consumers become comfortable with e-wallets.

Buying Mobile

While the US mobile drive – specifically into e-retail – is relatively young with a majority of consumers buying online via desktop computers, it will gain greater momentum as smartphone shopping becomes a global norm. In fact, many American buyers actually prefer using their smartphones all the time, as opposed to restricting them for special occasions/purposes. In terms of e-retail, they are already making use of their mobile phones for a range of shopping related activities, which

include tracking order delivery, locating stores/store-related information, making comparisons amongst retailers etc. They are also using coupons or discounts from their mobile apps to subsequently make in-store purchases. In fact, products such as toys, video games, music, and jewellery are largely bought on phones rather than computers. This has created a lucrative market,

with eBay becoming the leading retail app in the country for both Android and iOS platforms, which is followed by other big names such as Groupon and Apple. Meanwhile, price is another driver behind m-commerce. Consumers name saving money to be the most important factor for going mobile during holiday planning, with smartphones being able to offer the best deals (as per 62% respondents) and also providing greater ease of inputting information (as per 58% respondents). This keeps mobile sales on the rise, with 49% of ecommerce sales set to go mobile in 2020 in comparison to only 35% in 2017. Additionally, many consumers are also interested in having grab-and-go stores with self-checkout from phones, calling more players to enter the mobile market.

Picking Personalized Solutions

E-retail is not limited to buying just online. It has been triggered by a surge in consumer demand for a personalized, omnichannel shopping experience that blends both the physical and cyber worlds. In other words, having a consumer-centric business model that gives buyers options such as to search/pay online, examine or pickup offline – as per their specific requirement. For this reason, sales of purely brick-and-mortar stores are projected to shrink by 15-20% by 2020 as going digital becomes the cornerstone for a multitude of players. Brands are not simply utilizing this platform to sell goods but also to tell their stories to a wider audience.


Operationally, while large players are currently making digital brand acquisitions as a quick way to have a digital presence set up with all analytics in place, smaller ones are going for cloud solutions that provide access to cost-effective e-platforms for specific processes. Meanwhile, digital marketers have also designed metrics such as CPM (impressions), CPC (clicks) and CPL (leads) to get a true ROI for their campaigns. At the same time, retailers are also using large e-data sets on human behavior and interaction to push sales forward. This will further blur the divide between physical and digital expenditure as omnichannel becomes the driving trend behind ecommerce.

Extending Global Interactions

While cross-border activity in the US is largely limited, with a majority (66%) of consumers shopping domestically, a host of other global transactions are nonetheless pushing ecommerce forward. This is creating a huge impetus for American players to ramp up international distribution. In this regard, the global marketplace Etsy has taken a strong stance to

help SME owners expand their customer base internationally, opening up payment platforms in Europe, Canada, Australia, New Zealand and Hong Kong. In fact, these marketplaces have proven to be a highly cost-effective and reliable medium for smaller firms to enter global sales, which will become even more popular with the streamlining of payment methodologies that cuts down upon conversion fees.

These merchants are leaning more towards choosing a simple, catchy and exclusive name that is easy to understand, type and remember, as well as creating a strong level of trust amongst buyers from different backgrounds. After all, e-retail hasn't always worked and it clearly works even where borders exist.

Steady Market Prospects

These drivers are playing well for e-commerce on the whole, with B2C sales having risen by a compound annual growth rate (CAGR) of 14.9% from 2015-17. It is further projected to become a ~USD 521.6 bn market by 2018.Meanwhile E-GDP has also increased from 1.9% in 2015 to 2.3% in 2017, with an increase of 2.6%in 2018. The entire industry is on a rising trajectory. 

3. Key Challenges

While digitalization – specifically digital commerce – has become a thriving part of the US retail landscape, it does come with strings attached. Players have to keep a tab on key issues along the way in order to iron out any bottlenecks that can inhibit market growth.

Streamlining the entire shopping experience

One of the greatest drivers encouraging consumers towards e-retail has been added convenience across the shopping journey; however, it can also become a reason for them to backtrack. Players must ensure that all procurement, storage and logistical processes are properly streamlined across the chain, enabling buyers to get their goods and any needed customer support on time. For example, while home delivery is the most popular amongst American consumers (with a majority going

for regular shipping), shoppers may also opt for quicker alternatives such as same day/next day/2-day express delivery, depending upon need. In addition, the provision of extra sales features such as gift wrapping/chat boxes etc. are also sought after, especially as e-channels are popularly used by American buyers to purchase gifts on special occasions. In fact, consumers are even willing

to pay extra for these value added services in order to meet their inclusive needs for a variety of purchases; the act of merely having an e-gateway to transact is not enough. Hence, merchants/marketplaces must place greater importance on these core service mechanisms,

the absence of which can drive existing/potential customers.

Keeping a stringent check on social factors

Today’s consumers – especially millenials – value more than just price. They look for a variety of features that not only include product quality, service etc., but also how the product value is derived. In other words, whether the merchant has engaged in any malpractice across the chain, the environment, etc. Studies show that over 70% of millennial consumers prefer to pay more for a product from a responsible company and 87% are more willing to purchase a product with a social benefit. This, in turn, impacts corporate reputation. For example, Amazon’s infamous treatment of its workers eventually led to the proposal of the “Stop BEZOS Act” has undeniably cost the player its brand image. Meanwhile Etsy, which is more of a niche player, has gotten acclaim for its responsible Impact Report that zeroes in on all its social policies/ practices. Holistically, this means that no ecommerce player – regardless of its size/establishment – is spared from having a sound CSR program, where it not only sells goods but also gives back to society.

Being careful with trust

No product, technology, or industry can function well without trust, which needs to come from all involved stakeholders. This concept especially holds true in e-retail, given the looming concern over cybersecurity and fraudulent transactions. Many consumers are still hesitant to share sensitive data or transact online, with over 79% of surveyed American buyers preferring not to use Facebook Messenger to make payments. In fact, the biggest concern with purchasing via social media platforms stems from security. As a consequence, 53% of e-shoppers in the US are also skeptical about using digital wallets. Businesses must overcome this obstacle by integrating advanced payment providers, adopting technological authentication channels such as biometrics, and creating awareness among the public. Building trust from within will go a long way.

4. Way Forward

Looking at the big picture, the US has always been at the forefront of development on a global scale, hence being quick to respond to emerging trends such as ecommerce. It is equipped with all the infrastructure and logistics know-how to support the surge in online shopping, encouraging the further rise of e-shoppers. However, future success will be determined by how well it is able to address consumer needs for a personalized and omnichannel experience, keeping trust intact through socially acceptable practices. Management of ecommerce efficiency would ideally need to be coupled with effective governance across the value chain, making room for the market to continue leaping forward.

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