The World’s Leading Online Retailers
..has yet to be compiled, all indications are that the top online sellers increased their share of the market. For the purpose of this ranking, we include those retailers that generate 50% or more of their revenue online.
Distinguishing between online and brick-and-mortar gets increasingly difficult, given that virtually every retailer in this day and age is to some extent an online seller. A website has become as essential as a telephone for conducting business. Based on survey responses, upwards of 90% of the Top 200 U.S. retailers sell some products online. And digital platforms like Reverb.com are attracting new sellers at a torrid pace.
The appeal of online shopping is easy to grasp. It offers convenience, access to a wide range of inventory, and a high degree of pricing transparency. The leading online sellers also offer exceptional service through liberal return policies and speedy delivery.
A straight-line extrapolation of the growth rate of online sellers would suggest that in the not too distant future, all retail will be conducted online. As logical as this might sound, it’s more likely than not mistaken. Two decades ago, big-box retailers such as Toys R Us, Staples, Best Buy, and Guitar Center were dubbed “category killers.” The conventional wisdom was that these sprawling stores, with their broad selection and discounted prices, would wipe out all other retailers. Today, many of these “category killers” are prey, not predator, burdened by debt and besieged by a multitude of new competitors. Don’t think that today’s apparently invincible online sellers couldn’t face a similar threat down the road.
Some stress points are already emerging. Between 2012 and 2016, revenue at Alphabet, the parent of Google, doubled from $46.0 billion to $90.9 billion. Net income surged from $10.6 billion to $19.5 billion. What those numbers reflect is the growing amount being spent on search, keywords, and other tools for achieving visibility in a densely crowded online environment. Financial analysts project continued sales growth for Google, which translates into higher costs for online sellers.
Thanks to Amazon Prime, customers are now largely unwilling to pay for freight. That means the cost of shipping, especially heavy items such as speaker enclosures and drum kits, come out of gross profit. With FedEx and UPS on record with plans to increase freight rates, online sellers can expect higher costs.
Customer security is another critical and costly issue. With customers increasingly aware of the risks of identity theft, providing a secure shopping environment is an absolute requisite for any retailer. Leading retailer Target serves as a cautionary tale. Three years ago, hackers breached the retailer’s computers and made off with credit card data and information of approximately 70 million customers. Target’s profits collapsed in the following quarter and have yet to fully recover, and the company has spent upwards of $200 million to fortify its systems. A comparable breach for even a large online music retailer would probably mean bankruptcy.
These added promotional and freight costs and security issues will certainly not spell the end of online retail. But they will most likely moderate the growth rate and derail projections that all retail will take place online.
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