5 Key Takeaways From comScore’s Q3 State of the U.S. Online Retail Economy Report

As a data-driven company, we’re always on the lookout for online retail reports which can help shine a light on wider e-commerce trends for both ourselves and partners throughout the year. Though the amount of industry research and analysis out there has never been greater, it’s not always easy finding sources of info you can trust.

One publisher whose output we find ourselves returning to time and again is comScore. The US media giant pumps out a stream of region-specific online retail data throughout the year, and is always worth turning to for wider context on online spend.

As we face into the holiday season in earnest, comScore’s ongoing series of quarterly reports into the U.S. online retail economy is a particularly useful data source to have available. In this piece, we’ll pick through their recently published Q3 report to highlight five key points that should be of interest to anyone working in online apparel.

As usual, the full presentation and deck from Andrew Lipsman are well worth an hour of your time, but hopefully the takeaways below will also provide some instant value.

1. Online Spending Is Actually Up Heading Into Thanksgiving Weekend

Though you could be forgiven for failing to notice it in the context of a spectacularly negative election year, U.S. online spending has actually been well up in 2016, particularly since April onwards.

Digital commerce spend continues to grow.
Source: comScore State of the U.S. Online Retail Economy in Q3 2016 report.

Lipsman was rightfully cautious about picking out specific root causes this early, but it does look as if wider wage growth is fuelling overall spend. An extremely positive pattern of more buyers spending more dollars per transaction was apparent. The report also pointed to signs of a general shift to larger ticket purchases as a contributory factor.

Figures show more people spending more money throughout Q3, 2016.
Source: comScore State of the U.S. Online Retail Economy in Q3 2016 report.

Whether these trends will carry through into record Black Friday/Cyber Monday takings is of course unknown at the time of writing, but it certainly bodes well for the wider holiday season. As Lipsman noted, apparel and accessories is traditionally seen as something of a bell-weather category, so brands and retailers will be hoping that mid-year momentum continues long into December across both fashion and other verticals.

2. Mobile’s Headroom Remains Enormous

Over the course of the Q3 report, Lipsman dived into considerable detail about changes to purchasing patterns across mobile and desktop over the last twelve months. Long story short here – mobile is very much still on the march.

Though the month-on-month trends around mobile are fascinating, it’s worth taking a quick step back to appreciate the size of the opportunity still on offer. While Q3 2016 saw mobile hit 20% share of total digital commerce spend, that still leaves an enormous amount of room to grow into.

As a quick breakdown of discretionary retail spend by channel shows, that growth is also taking place at a quite a clip. Mobile commerce growth is substantially out ahead of both traditional e-commerce and bricks-and-mortar spend.

Mobile conversion remains a challenge.
Source: comScore State of the U.S. Online Retail Economy in Q3 2016 report.

There’s still plenty of work to be done by retailers and brands in order to optimize that mobile spend, however. As Lipsman points out, mobile dollars spent still falls significantly behind mobile’s share of digital media time spent. In other words, people are increasingly happy to browse on mobile, but still comparatively reluctant to seal the deal there – mobile conversion remains a challenge.

3. Returns Are About to Become Everybody’s Problem

One seemingly innocuous figure leapt out at us in the context of identifying drivers of customer satisfaction – Lipsman noted that free shipping is now offered as standard on over 60% of online transactions.

Let’s pause there for just a second and reflect on how quickly the situation regarding free shipping has changed over the last five years. What used to be considered something of a luxury in terms of customer service, is now demanded as standard. Customers expect their goods to arrive incredibly quickly, and for retailers to swallow any costs involved in shipping or accepting returns.

comScore's 2016 mobile app report.
comScore produce excellent data-driven e-commerce reports such as the 2016 U.S. Mobile App Report throughout the year.

It’s the returns part of that equation that should be worrying merchants. What we’re seeing in conversations with a subsection of both current and potential partners in the U.S. is that the negative impact of returns is still not always at the top of firms’ agendas, and is also often significantly under-estimated.

That’s a situation we think is going to change rapidly in the next twelve to eighteen months as competition increases and the focus on margins becomes ever more intense. There’s been something of a free-for-all over the last few years to tempt customers through the virtual doors, the focus is about to shift heavily to what happens post-sale.

4. Fashion’s Future Looks Fantastic (But There Will Be Winners and Losers)

A lot of people may be unaware of just how huge a portion of digital commerce apparel and accessories account for. As Lipsman points out, computer hardware and apparel have been the top two categories online for quite some time now, with the two trading places throughout 2016.

Taken as a product category in its own right, the outlook for fashion remains strong, with comScore assigning it a +15% growth rate for Q3 2016 – a nice bit of momentum to be taking into the business part of the year.

At the risk of being slightly gloomy, it’s worth noting that this particular rising tide won’t necessarily lift all boats. While the numbers above show that the money is out there, the fight to actually claim a part of it is heating up. Real differentiators such as being able to solve sizing for customers will start to play more and more of a role heading into 2017.

5. The Holiday Season Is About Much More Than Thanksgiving Weekend

As our own recent breakdown of holiday spending patterns showed, there’s a lot more to seasonal spend than just the two headline days of Black Friday and Cyber Monday.

comScore’s figures for 2015 showed 16 days where online desktop spend exceeded $1 billion during the holiday period. This year they’re sticking their neck out with a firm prediction that every day from Cyber Monday to Free Shipping Day on December 16th will match that, and it’s hard to bet against them.

comScore's holiday spending predictions for 2016.
Source: comScore State of the U.S. Online Retail Economy in Q3 2016 report.

Mobile spend is also going to be one to watch throughout the season, and is a topic we’ll be returning to in more detail here on the blog in upcoming months.

We hope some of the points above give you food for thought as the holiday season unfolds, and highly recommend checking out the full comScore report if you have a few minutes to spare. There’s a lot there to unpack, but you’re guaranteed at least one major “aha moment” once you dive in.

If you’d like to discuss ways of making sure your next quarter is a profitable one, get in touch with us today and we’ll be happy to explain how solving sizing can significantly boost your bottom line.