January 7, 2019 • Volume 29
2018 Online Holiday Shopping Wrap-Up
Welcome back, faithful Newsletter readers! We hope that you’ve all enjoyed some time off and are refreshed and ready to tackle 2019 with us. We’ve resolved to be EVEN MORE informative and entertaining in 2019, so hold on tight. In this first issue of 2019, we’ll take a final look back at the 2018 holiday season, armed with data through December 31st.
More dollars per buyer, not new buyers, propel 2018 holiday sales
Online holiday sales (November 1 through December 31) were up 21.4 percent from 2017 (compared with 20.4 percent growth for the same period in 2017). This growth was driven largely by an increase in spend per buyer, which was up 15 percent, rather than growth in the number of online buyers, which was up 6 percent.
Early season shopping is increasing and increasingly relevant online
The holiday period really breaks out into two halves. The first half begins on November 1st and runs though Cyber Monday. In 2018, 49 percent of sales came on or before Cyber Monday, growing by 24 percent from 2017. Sales growth was more modest in the post Cyber Monday period, growing by 19 percent.
Now, 19 percent is pretty impressive, but clearly retailers’ efforts to kickstart the online holiday shopping season have worked. This is particularly evident when we see that Black Friday online sales surpassed Cyber Monday this year for the first time.
Amazon’s strong push to the finish
Through the holiday season we’ve been tracking all retailers, Amazon in particular. This has been a fine holiday season for Amazon--its biggest ever—with sales growing by 17 percent from last year. But because Amazon’s growth trailed that of the overall e-commerce sector this year, its share for the overall holiday season shrunk slightly, from 35 percent to 34 percent.
However, as we got closer to Christmas, Amazon’s infrastructure had its chance to shine. With 100 million square feet in fulfillment space (in just the U.S.), tighter operations, and trusting consumers, Amazon is uniquely capable of fulfilling the orders of last-minute online shoppers who want to find just the right gift but really don’t want to have to leave home to compete with the desperate throngs picking over the last of retailers’ holiday stocks.
The chart below tracks Amazon’s market share (excluding Prime Now, Amazon Fresh and other Amazon-owned properties) by day, time-aligned with Christmas. As we’ve seen in the past, Amazon’s share hit a low point on Black Friday and then began a steady acceleration right up to the holiday, peaking on December 18th when Amazon won 50 percent of online sales.
Electronics category dominates, but falling prices for popular items diminish growth
Finally, let’s look at performance by category. Electronics was the biggest category this year, as it has been every year since 2000 or so, accounting for 23 percent of online sales.
But with a seasonal growth rate of 16 percent, electronics lagged compared to the overall holiday season, which was up 21 percent. This is likely driven by the continued move toward lower prices in the category: the TV that cost me $1,000 last year might have cost as little as $500 this year (eliciting a collective ‘Doh!’ from the millions of buyers like me).
Also, the most robust emerging electronics category, voice-powered speakers, tend to be very inexpensive. Amazon’s Echo Dot and Google’s Home Mini, the top selling devices in the category, both cost less than $50, while Apple’s more expensive HomePod hasn’t yet made a significant impact on the market.
Clothes sales close out strong, while there is play in online toy demand
Apparel had the most positive story to tell in holiday 2018, accounting for 19 percent of sales and growth of 27 percent. On the negative side, online Toys disappointed in 2018. We had expected to see significant growth in online toy sales in 2018 as the shuttering of Toys R Us’ brick and mortar stores would have forced consumers online to find the long-tail items that mass retailers Walmart and Target wouldn’t have carried. But at 18 percent, Toy category growth suggests that consumers either bought fewer toys or settled for what they could find at their local Big Box retailer.
More predictable growth as the online channel matures
Holiday 2018 has largely stuck with the script that we’d expected early in the year. While e-commerce is still growing like my waistline over the same period, it is (likewise) becoming increasingly predictable in its growth.
Retailers and shippers that were surprised with demand flows this year didn’t do their homework because the trends are becoming well established. The only notable shift that we saw this year was the swapping of Black Friday and Cyber Monday, which has been a long time coming, but notable nonetheless because they do represent the first and second biggest sales days of the year [and in the history of U.S. e-commerce for that matter].
Prediction: 2019 will be big, but with bumps in the road for retailers
Any way you wrap it up, 2018 was a great year for e-commerce, and the holiday season represented a strong close. We seem well set up for a merry 2019, with some new buyers in the mix that likely had a positive experience. The most interesting surprises (Amazon.com share shrinking, Black Friday surpassing Cyber Monday) reflect the fact that e-commerce is beginning to swing away from its early e-commerce pure-play roots toward an environment more amenable to brick and mortar retailers.
But this is in no way inevitable. Brick and mortar retailers’ recent success has been driven by increased investments in e-commerce that [finally] leverage their strengths (trust, stores, and buying power). There will be bumps in the road ahead: Retailers will miss e-commerce growth targets from time to time, profitability will continue to be a challenge. The next test for brick and mortar retailers will be their resolve when the news is periodically less good.
Finally, from those of us at Rakuten Intelligence; we thank you for your continued support and interest in what we do. If you have questions or feedback, please don’t be shy to reach out to me here or on Twitter.
Happy New Year!
Ken Cassar is vice president, principal analyst at Rakuten Intelligence, where he looks at trends in the e-commerce industry armed with Rakuten Intelligence's robust set of online sales data.
Ken brings a rich online retail background to Rakuten Intelligence. Most recently, Ken was SVP, Media Analytic Solutions at Nielsen, where he developed several innovative digital commerce measurement and advertising effectiveness solutions. Prior to Nielsen, Ken was an analyst at Jupiter Research, where he was an early thought leader, trusted adviser, and media source on e-commerce. His prescient outlook on fledgling e-commerce industry was a key contributor to Jupiter’s dominance as a digital media zeitgeist at the dawn of the Internet.
Ken has an MBA and Bachelors Degree in Political Science from the University of Connecticut. Ken aspires to stay technologically ahead of his teenage children, as evidenced by his ‘Gadget Geek’ Rakuten Intelligence's profile. He also has the appropriate jacket for every occasion.