You know the big guys — Amazon, eBay, QVC, L.L. Bean — but there are a lot more players in the internet, TV, and mail-order retailer space who are gearing up for the holiday shopping season. In fact, the niche consists of 40,000 companies that generate $705 billion annually.
The internet, TV, and mail-order retail industry is concentrated at the top and fragmented at the bottom with the top 50 firms account for about 60 percent of industry sales. The average retailer operates out of a single location, employs 9-10 workers, and generates $17-18 million annually, a far cry from Amazon with its nearly 1 million employees and $11.59 billion in 2019 revenue.
Would a company in the internet, TV, and mail-order retail space be a good niche to include in your small- to medium-sized business (SMB) portfolio? Let’s peruse the details…
The big-picture of operations
Internet, TV, and mail-order retailers sell merchandise through non-store channels, including catalogs, toll-free numbers, the internet, and television (electronic shopping).
- Major product categories include drugs, health and beauty aids; computer hardware, software, and supplies; women’s clothing and accessories; and books.
- Other products sold include kitchenware and home furnishings; audio equipment, musical instruments, radios, stereos, CDs, and records; sporting goods; TVs, video recorders, video cameras, and DVDs; furniture, sleep equipment, and outdoor patio furniture; and toys, hobby goods, and games.
- Examples of internet, TV, and mail-order retailers include internet auction sites, mail-order book clubs, catalog/call center operations, internet-only retailers, and home shopping networks.
Top trends for internet, TV, and mail-order retailers
Impact of COVID-19
Sales for non-store retailers decreased 0.2 percent in value month over month in September 2020 after holding steady in August and increasing 0.7 percent in July. However, sales increased 27 percent year over year for September. Amazon reported a 40 percent increase in net sales during the 2Q 2020 versus year-ago. Amazon also increased grocery delivery capacity by over 160 percent and tripled grocery pickup locations to support customers during COVID-19.
The smartphone revolution
The increasing prevalence of smartphones has led to growth in smartphone commerce, with retail purchases via mobile devices becoming more common. Consumer purchases via smartphones are projected to reach 54 percent of all purchases in 2021, up from 40 percent in 2018, according to OptinMonster.
Online apparel sales driving industry growth
Online sales of apparel and accessories are the fastest growing of all e-commerce segments, with an annual compounded growth rate of 12-14 percent anticipated from 2018-2022, according to eMarketer. The projected increase is due to improvements to online merchandising and visualization, which have helped consumers overcome hurdles to purchasing. Free and easy returns and the presence of customer reviews have also helped sales grow.
Online advertising revenue climbs
Online ad categories include search, display, classifieds, mobile, lead generation, and emails. As consumers spend more time on digital media, companies are realizing the value and effectiveness of Internet-based marketing vehicles, driving spending on online advertising higher. Spending on online ads increased 21-22 percent annually in 2016-2018 and 16 percent in 2019, according to the Interactive Advertising Bureau (IAB).
Catalog marketers evolve
The critical importance of online sales is forcing catalog marketers to grow web-based operations while still maintaining a presence in the print world. The transition to online retailing has proved difficult for some catalog marketers. Several large companies, including Oriental Trading Company, Harry & David Holdings, and Orchard Brands filed for bankruptcy in recent years.
TV viewership drops among young adults
Americans spend an average of five hours watching TV every day. But due to the growing popularity of the Internet, mobile phones, social networks, and video games, Americans ages 12 to 34 are watching less TV than they used to. Adults 35 and older are watching more, however, with adults age 65 and older watching more TV than ever, thanks to digital video recorders. As a result of these trends, home shopping networks are shifting to produce web and mobile-specific content.
Risks to the internet, TV, and mail-order industry to consider
- Vulnerability to economic conditions: Although the industry has not suffered to the same degree as the brick-and-mortar retail channel, sales growth slows or declines during recessionary periods. High unemployment and decreases in consumer spending, particularly discretionary spending, affect demand.
- Competition from traditional retail and manufacturers: Physical stores allow customers to touch and feel merchandise prior to purchasing, and often have branded websites that compete directly with Internet-only retailers. Brick-and-mortar retail shops provide a shopping experience and immediate gratification some shoppers prefer. For online apparel retailers, sizing can be problem.
- Seasonal demand: Sales typically increase during gift giving periods. In some cases, sudden spikes in website traffic can cause outages and lost sales. Effective inventory management is critical during peak periods, as excess merchandise typically requires mark-downs or write-offs. Companies often incur incremental costs by offering shipping discounts or promotions to capture sales during key periods.
- Variability in costs: Shipping and postal rates are affected by numerous factors, such as fuel costs, and are subject to periodic increases. Mail-order houses bear the cost of catalog production, which varies according to paper and postage costs. Home shopping networks invest considerable funds in television production.
- Reliance on information systems: System interruptions or problems with communications suppliers can result in outages or loss of critical data. Maintenance and upgrades can be costly for sophisticated computer systems used to process sales transactions, fulfill orders, and ship merchandise. Hackers and cyberattacks have been responsible for security breaches, operational disruption, and data corruption.
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All of the industry information in this post came directly from the Vertical IQ Industry Profile on Internet, TV, and Mail-Order Retailers. Reviewing this profile, or even doing a quick five-minute review of the industry’s Call Prep Sheet, gives you valuable insights into your prospect within this niche — their opportunities as well as the issues that may be keeping them up at night.
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