E-commerce growth has been on a trajectory for a number of years. And while that growth is in no way ending, it is beginning to slow down.
No longer a novelty, e-commerce growth is expected to slow down in 2019, up 12.4% for the year vs. 14.3% in 2018. As a result, competition is sure to intensify.
Understanding shopper intentions, of course, is key to standing out. To that end, Adobe recently conducted analysis using Adobe Analytics to determine how regional and demographic differences factor into online shopping spend and behavior. The main finding: Large cities are driving stronger e-commerce growth than smaller cities, largely due to the differences in population.
“We’ve found that even though cities with less than 100,000 people have higher revenue per visit, conversion rate, and average order value, more densely populated cities still drive the majority of online revenue growth for retailers,” said Vivek Pandya, managing analyst at Adobe Digital Insights (ADI), Adobe’s research arm. “With differential e-commerce growth, there may be a digital divide in the not-too-distant future. We could see a paradigm emerge where more populated cities are catered to through the variety of online marketplaces and efficient shopping experiences, while sparsely populated areas are left with limited brick-and-mortar storefronts that offer a more basic set product options.”
Consumers in large cities place slightly bigger orders with higher priced items in their shopping carts, the research found. However, conversion rates are higher in smaller cities (2.4% vs. 2%). Additionally, purchases via smartphones are more common in large cities, with $1 of every $3 spent online in large cities coming from mobile phones.
Large-market consumers also look for different products online than smaller market shoppers, the research found. Smaller markets are more likely to buy memberships, apparel, and accessories, and office supplies and professional services online. On the other hand, large markets are more likely to buy computers, phones, electronics, baby and toddler gear, as well as sporting goods online.
“One of the major takeaways from our research is the fact that affluent/high-income cities are fueling the online economy, but they don’t convert easily,” Pandya said. “Relative to their share of the population, high-income cities account for more retail traffic than lower income cities. That means that improving visit performance in higher income cities could be a viable strategy for growing e-commerce sales, while generating more visits in low-income markets could be a good strategy going forward.”
Based on the analysis, ADI predicts the concentration of e-commerce sales growth this holiday season will likely come from high-income markets. But that doesn’t mean marketers should forget about holiday shoppers in lower income markets.
That’s because, regardless of income, everyone appreciates holiday weekend deals, ADI found. In fact, the value of a visit increases 74% during the five-day weekend of Thanksgiving through Cyber Monday, regardless of consumers’ incomes. However, income levels do shift the types of discretionary products consumers purchase online, with more than 75% of U.S. e-commerce spend during the holidays on personal items as opposed to more generic items for the household.
“More specifically, what’s interesting to see is that in low-income markets, spend shifts toward more experiential purchases that give consumers something to do, with media and entertainment capturing more share of wallet than in high-income markets,” Pandya said. “On the other hand, high-income cities shift to alcohol and apparel, in terms of discretionary spend.”
ADI’s analysis also looked at e-commerce trends in rural vs. urban areas. It found consumers in rural areas shop online less than those in urban areas. Rural cities do see higher conversion rates, though, which indicates an opportunity to bring more consumers in rural cities online.
Additionally, the research also found cities with diverse populations outperform more uniform markets in e-commerce spend. Diverse cities exhibit stronger year-over-year growth in both visits and conversion. But conversion rates are higher in non-diverse cities.
Generally speaking, consumers in all markets are getting more comfortable with using their mobile devices to make online purchases, but there are some differences in purchase patterns depending on the device of choice.
“Those who use smartphones for a large proportion of their shopping are buying a variety of items, from toys, to sporting goods, personal care items, alcohol, tobacco, and more,” Pandya said.
View the full report below, or click here to view it on SlideShare.