Who Will Be the Top Retailers of 2023?

As a part of our 2021 Future of E-Commerce poll, we asked people to predict the future of some of the top retailers in America. They were all part of Internet Retailer’s Top 25 list in 2016 and were publicly traded companies. We asked survey respondents to judge whether or not they thought these companies would outperform the S&P 500. These were the results of the poll:

It’s easy to see and understand why most put their faith into Amazon. At the time of the survey and currently, they are the largest online retailer. They account for ~50% of all U.S. e-commerce sales and 5% of all U.S. retail sales.

Other companies like Walmart, Apple, Home Depot, and Costco have proven strength in brick and mortar retail as well as maintaining a strong online presence. It’s no surprise survey takers were optimistic in their performance. For some companies, there seemed to be little to no hope. Companies like Office Depot, Sears and Macy’s had been failing to compete in both e-commerce and retail stores.

To check in on the progress of these companies, we took the stock price of what the companies opened at in January of 2016 and weighed the percentage of change against their opening price in January of 2019. This was then set against the performance of the S&P 500 to see if companies were over or under-performing.

STOCK PERFORMANCE JAN 2016 - JAN 2019

The baseline starts with the S&P index’s performance. Since 2016, the S&P 500 grew from 2011.71 to 2568.11; an increase of 27.65%. All other companies looking to be considered a winner would have to have matched or beat this growth in their stock price.

Obvious winners were companies people already believed in like Amazon which grew by 166%, Wayfair at 113%, Walmart at 53%, and Apple at 48.5%. While a third of survey respondents were confident in Etsy, I doubt anyone expected a 532% growth in stock price from ~$8 to $53. Perhaps even more surprising were Best Buy and CDW. Less than a tenth of survey takers believed in either of these companies, yet they both posted a rise in stock by 85% and 94%, respectively.

For the losers, most of these companies were obvious to survey takers in 2016, as well. Williams-Sonoma, Office Depot, Macy’s and Sears have all posted losses since. Sears the worst with losing 99% of its stock value. Sears plummeted from $20.07 a share in 2016 to opening up 2019 with a mere 0.17¢.

Other surprising losers being Target and L Brands, the parent company of Victoria’s Secret and Bath and Body Works. Almost a third of survey takers were high on Target, but continued store closures have hurt the store and they posted a loss of 4.6% over the last three years. In the same time, L Brands had fallen by 69.5%. Only a tenth of respondents were up on the company, but few probably knew they would underperform the likes of Office Depot. Recent poor press and social media outrage has only further damaged the company.

Nordstrom, The Gap and Groupon should all be noted as companies not posting losses. They simply did not experience enough growth to outperform the S&P index. Nordstrom experienced a five year low dipping to $36 a share in May of 2018. Since, they’ve been on the recovery and opened 2019 at $49.77. Groupon has never shown significant growth since falling February of 2015. The Gap only grew slightly in 2018, only to come back down entering 2019.

Perhaps noticeable by their absence from the current chart are Staples and HSN. In 2017, Staples was bought out by an investment firm and removed as a publicly traded company. The same year, Liberty Interactive, parent company of QVC, completed the full acquisition and merger of HSN with QVC. I included the data for Liberty Interactive over the three year time period, and they fell 22%.

Now’s your opportunity to let your predictions be heard and take the 2023 Future of E-Commerce of Survey. Tell us where you think retail sales will be in five years and more.
Click the link to take the survey now: https://forms.gle/icJhnZJ3nHBtggT77

Will E-Commerce Growth Explode by 2023?

2023 E-Commerce Survey

In the past, we’ve asked e-commerce professionals to give us their predictions on the future growth of e-commerce. By looking five years in the future, we can actually see a reflection of current attitudes. For example if people are bullish on the future of drone delivery, they will respond favorably to their future.

2021 vs 2022 E-Commerce Total Sales Predictions

Taking a look at past surveys, we can see noticeable differences in respondents from the 2021 survey to the 2022 survey. In 2016, most people thought e-commerce would account for 10-20% of the the total market share by 2021. Few thought it would account for more than 30% and almost no one thought it would amount to less than 10%. This is very telling of reasonable, expected growth.

Survey takers in 2017 were far more bullish of e-commerce sweeping up to 30% and beyond of total retail sales. Over 60% of survey takers thought e-commerce would carve out this large piece of the pie by 2022. Interestingly even though almost no one thought this in 2016, almost 4% of survey takers thought e-commerce would stagnate or fall to under 10%.

What are the actual numbers telling us, though? The reality is e-commerce is steadily growing. When you remove fuel sales, automobile sales, and sales at restaurants and bars - (those overwhelmingly dependent on physical POS) - e-commerce accounted for 10.5% of total retail sales in 2015. This share grew to 11.6% in 2016, 12.9% in 2017, and 14.3% in 2018.

Percentage of E-Commerce Growth

While the actual share of total retail sales taken by e-commerce has continued to grow, the percentage of e-commerce growth over itself in the past few years has generally plateaued to a range of 14-16%. This growth is reflected in the U.S. e-commerce sales themselves. In 2016, e-commerce sales were $394Bn. The continued growth was followed by $453Bn in 2017 and, in 2018, sales crossed the half trillion mark. If the economy continues on the same course, there’s nothing to suggest U.S. e-commerce sales will grow more than 15% every year.

Current growth trends don’t seem to indicate e-commerce accounting for 30% of total sales by 2022. It’s much more in line with respondents to the 2021 survey. So what made people so bullish in 2017? Perhaps it’s the continued reports of store closures? Maybe it’s simply personal biases of lives lived nearly entirely through e-commerce? Most major metropolitans nowadays allow for someone to live nearly entirely outside of brick and mortar stores, save for aforementioned gas stations, restaurants and bars. Or maybe they really do see a coming wave of e-commerce adoption and shift in the retail space.

Now’s your opportunity to let your predictions be heard and take the 2023 Future of E-Commerce of Survey. Tell us where you think retail sales will be in five years and more.
Click the link to take the survey now: https://forms.gle/icJhnZJ3nHBtggT77

Drone Delivery is Coming To Your House, Eventually

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The emergence of new technology creates new solutions. Many believe we’re on the cusp of a second wave of an automation revolution. This line of thinking is lead by the emergence of driverless vehicles and drone technology. Both are proving safer and faster solutions to current delivery systems. As part of our yearly future looking survey, we asked members of the e-commerce world to speculate on the impact of these technologies. Within a five year scope, people are generally optimistic both drone and driverless vehicles will have an impact on how we receive our goods.

  • Only 8% of survey takers believe driverless vehicles will account for less than ten percent of all deliveries.

  • Over half of all respondents believe driverless vehicles will account for at least 30% of the handling of all packages.

  • Drone prevalence is a bit more pessimistic among survey takers, but over a third still believe drones will account for 10 - 30% of all deliveries.

Percentage of Packages Delivered by Drone or Driveless Vehicle in the Next 5 Years

It’s not hard to see why unmanned vehicles and drones can provide a better experience for customers. I believe it’s all but a forgone conclusion these solutions are going to replace our current ones. However, five years maybe too optimistic for full adoption and rollout everywhere. For example, Tesla’s semi-trucks aren’t meant to hit production until 2019. Even though they’ve received orders from large companies reliant on fleet transport like Walmart, FedEx and Anheuser-Busch, these orders in no way are full compliments to the current fleets. This is partially due to the trucks being electric, making them bound to refueling limits in the infrastructure and distances they can travel.

Drone delivery may have a bit of a leg up on driverless vehicles though, because they can bypass the limitations of current infrastructure. It’s likely we’ll see a rise in drone deliveries within the next 3-5 years in the US, but developing countries with weaker infrastructures are likely to focus on drone deliveries and implement it sooner. Consider the needs for medicine, food and other urgent delivery items. Companies aren’t going to wait for the best paths to be built for them when they can just fly over it all. Zipline, an organization out of Rwanda, is already delivery life-saving blood and medicine by drone at significantly faster rates than traditional delivery. As these fleets or squadrons of aircraft are built out, they’ll find usage in more commonplace delivery as well.

In America, there’s a need to find a “sweet spot” for roll out. It’s predicted suburban areas outside of cities are likely to be the first adopters and test sites for drone delivery. A lot of it comes to cost effectiveness. In dense urban areas, there’s a lot of choices and delivery times are general already low within 20 minutes. It’s not cost effective to use expensive aircraft to make a delivery in the same time. Suburban areas would benefit from the quicker delivery times and increased choice, though. Rural areas would as well, however, the demand and number of deliveries made would have to justify the wider area of operation and larger fleet needed to satisfy the same number of households.

Drones are subject to scrutiny by the FAA and require their routes to be designed and approved. This is important to remember when considering the rural vs suburban vs urban rollout. Again, suburban and rural areas are optimal for their lower density. Less risk of damage and injury in case of malfunction. Routes and acceptable fly zones will be easier to plot out. Low density also means less general congestion; one drone to a home, rather than five or more to the same apartment building. There’s also issue of noise pollution, as well. Cities like New York and Los Angeles may find themselves opposed to the sound of buzzing squadrons of drones at all hours. The FAA may have to implement acceptable fly times for certain areas, no matter the density.

While giants like Amazon and Alphabet have their plans for drone delivery, they’re ultimately going to be limited on widespread rollout as it will take time to approve the paths and times of operation the drones can operate in. It will ultimately be a current tech giant, though, “paving the way” so to speak as they have the capital to build the aircraft and work out these delivery routes.

I believe we’re definitely going to see a rise in these technologies, but nothing near as optimistic as respondents believe. We’re going to be a largely mixed traffic society, especially in America. Regulations on autonomous vehicles, when and where they’re allowed to travel is going to be their biggest hindrance. This will be especially true for dense cities until logistics and cost effectiveness are in their favor. This shouldn’t discourage vendors though. As the opportunities for new technology and delivery systems arise, they should be willing to explore these new, faster, and more efficient solutions.

New Laws Taxing E-Commerce More Ways Than One

National Internet Sales Tax

Back in June, the Supreme Court came to a decision on the sales tax case of South Dakota vs Wayfair. The state of South Dakota had been arguing the boom in e-commerce was costing their state tax revenue. Until June, the law did not force retailers to collect sales tax if they did not have a physical presence in the state. The Supreme Court ruled in favor of South Dakota, though, allowing for them to continue to collect on e-commerce sales. It was determined their tax laws weren’t a burden on interstate commerce. This is In part, due to the safe harbor provisions for smaller businesses who don’t conduct many transactions.

The ruling presented concerns among retailers, though. Does this open the door for other states to retool their tax laws, some of which are already over complicated? Is this going to impact the small business sales in their ability to remain competitive, especially those with limited physical presence? Many are looking to Congress to settle the issue with a national internet sales tax.

Will we have a national Internet sales tax in 5 years?

In our 2022 Futures of Technology survey, about half of the respondents believed we would have such a sales tax in the next 5 years. However, the survey was taken before the June ruling, so it seems almost inevitable now a federal solution is on the horizon. One such incarnation of this is the Marketplace Fairness Act.

Introduced in September, the Protecting Small Business from Burdensome Compliance Costs Act of 2018 seeks to offer some protection and simplicity for retailers while a federal solution is created. It seeks to force states to pick one uniform rate not exceeding the combined state and highest local tax rate. Meaning states can’t force retailers to collect based on the zip code of purchasers, and they can’t collect more tax than if the good or service was bought in state.

This is a good step for competitive pricing, but what about small businesses not looking to raise prices at all? Again, half of respondents to our survey believe a national sales tax will hurt their business.

Will a national Internet sales tax hurt your business?

The Wayfair decision highlighted a safe harbor threshold for $100,000 in sales or 200 transactions in-state. It was suggested this be the standard states follow. But by looking at the thresholds from states enforcing laws in October, this uniformity was not upheld. The MFA held a provision for small businesses to be exempt as long as their remote sales total under $1 Million dollars. While easy to understand and uniform throughout, this threshold is actually lower than current state by state laws. Each participating state is essentially giving an allowance for businesses. $100K allowances spread out begins to add up in the end.

From a consumer perspective, a national internet sales tax could solve issues with the complexity of their own taxes. Many states currently rely on self-reported use taxes in which purchasers are meant to report their own online purchases and remit payment. All federal solutions for this take the responsibility out of the hands of the consumer. Amazon began collecting sales tax and remain generally unaffected. Their size and convenience of service obviously still trumps the traveling to multiple stores (and still paying tax).

However with the responsibility of tax reporting taken out of the consumers’ hands, it’s being forced into business owners’. Many have called the deadlines to fall into compliance unfair. After the Supreme Court ruling, 11 states set an October 1st deadline for online sellers to be compliant with their new tax laws. Today four more states’ online taxes laws go into effect including North and South Carolina, New Jersey and South Dakota.

Less than a year’s time to bring a company in line with each states’ laws is not easy, as every state is different. Some tax shipping. Some don’t tax certain goods. Others tax similar products differently. Companies like Alavara, Vertex and Sovos are providing guidance and solutions for integration. But this doesn’t stem the overwhelming minutia involved with taxes. The majority of man hours and resources are spent on the odd cases, not the common customer. Customers who are tax exempt, for example, will present issues.

This rush to compliance has also given rise to a new fear for business owners, the audit. It’s not hard to imagine some ‘t’s may go uncrossed and some ‘i’s undotted. The lack of time, aid, and general complexity of every states’ needs can be a pitfall to anyone in the e-commerce world. Sellers solely on the Amazon marketplace can have Amazon collect the tax for them. However, the same issues with special case customers still arise and getting collection reports can be difficult. If you deal both on Amazon and your own shop, then it simply doubling up on the headaches to become compliant.

In the end, bringing a business into compliance is going to be a lot like swallowing medicine you don’t want to or ripping off a band-aid. Once it’s done, it’s done. There are still six more states slated to have collection laws go in effect by January 1, 2019. They include Connecticut, Georgia, Iowa, Louisiana, Nebraska, and Utah. Other states have yet to formalize their laws, while a few are in litigation. If nothing else, online sellers can be thankful for the handful of states who don’t sales tax.

Q&A with Rand Fishkin SEO & Beyond

If you saw the first video (6 SEO E-commerce Marketing Insights) in this two-part sitdown with Rand Fishkin, you’ll have walked away with some really valuable strategic and tactical advice for your e-commerce operation. In this video, Rand talks about the future of Sparktoro, his next project, as well as his hopes for the future in general. Rand also gives us a more personal insight to his book Lost & Founder and what he’s learned from baring his soul. I hope this video gives you just a small glimpse of the person I’ve come to admire over the years.