Electronics and appliances have made modern lives so easy: We bring our entire music collection in our pocket, and our week’s laundry is washed and dried by the time we get home from work. Adding to this convenience is our ability to discover, research, and buy these goods online—anytime, from anywhere. With online sales in the United States estimated to reach $523 billion by 2020—up 56% from $335 billion in 2015, what are American electronics and appliances retailers doing to increase their share of the pie?
In our report, “The State of Shipping in Electronics & Appliance Commerce”, where we surveyed 1,107 shoppers and 214 retailers in the U.S., we found that retailers in this category are making great headway, but there’s room for improvement. Here’s five insights from the report that you need to know:
1. Favorable Market Conditions
Superseded only by the popular clothing and accessories category, electronics and appliances is the second most popular online category in the country, with 73% and 47% of shoppers, respectively, regularly purchasing items in each category—showing the popularity of online as a sales channel. This popularity is also reflected in the value of e-commerce sales in the last few years: In 2012, electronics and appliances retailers generated $22.52 billion, and in 2014 we see this increase to $23.37 billion. To succeed in this category, retailers must be willing to invest in programs that will reduce friction for online shoppers to enable a smoother path to purchase.
2. Generation Z Consumer
Generation Z, the 16-24-year-old age group that’s a predecessor to the millennials, is the biggest buyer of electronic and appliances in the U.S. Interestingly, this goes against the trend in other developed countries, such as United Kingdom, France, and Australia, where the biggest buyers are the 55+ age group. Are retailers in this category considering the different wants and needs of this unique demographic?
With Generation Z representing 26% of the total current US population (or 83 million people), and will account for 40% of all consumers by 2020, it’s important for retailers to put into place customer loyalty and brand-building strategies to secure optimal, long term engagement. As mobile devices are expected to be a key driver, having the ability to extend or transform Generation Z’s online shopping experience right through to post-purchase on mobile devices will help electronics and appliances retailers win more market share.
3. Growth Potential
Almost half of US electronics and appliances retailers reported that 11% to 20% of their total sales is attributed to online channels in 2015—much higher than retailers across all categories, while a fifth attribute over 50% of their sales to online channels, and 13% attribute all their sales to online channels. While the demand for electronics and appliances in the U.S. is higher compared to the UK or Australia, there’s still room for growth before it catches up with the leading category, clothing and accessories. So how can retailers use their home advantage to their benefit?
4. Your Secret Weapon: Shipping
It’s encouraging to see American retailers in the electronics and appliances category coming close to meeting consumer expectations when it comes to express shipping (1-3 days), and standard shipping (5-7 days). However, there’s a large gap in other shipping options: only 25% of retailers offer hyper local shipping (1-3 hours) versus 61% of shoppers who want it, and only 44% of retailers offer collect from store (also known as click & collect) versus 82% of shoppers who want it.
While widely viewed as a loss leader in e-commerce, shipping should be regarded as an asset: It can be used as a marketing tactic to increase cart value and conversion rates. With 74% of U.S. shoppers willing to increase their spend to qualify for free express shipping, and 46% willing to do the same to qualify for free 1-3-hour shipping, retailers can set thresholds to ensure the cost of shipping is spread across evenly across all transactions. This way, retailers can minimize the impact that shipping has on profit margins.
Alternatively, using your physical stores as hyperlocal fulfilment centers to fulfill click & collect orders saves you the long trip from the distribution center to your customer, helping to reduce shipping-related costs further. Another benefit: 69% of American holiday shoppers bought additional items while in store. An exemplary electrical and appliance retailer, who uses this to great effect is Best Buy.
5. Closing the CX Loop
64% of Americans are more likely to purchase when offered free returns and exchanges, so why not invest in a customer-friendly returns policy? With 44% of US electronics and appliances retailers seeing a return rate of 1-5%, enabling self-service returns will help streamline processes, and give your customers a sense of control. To help increase your customer’s experience through the returns process, think about including the following options:
- Drop off at post office
- Drop off at another location
- Return goods via mail
- Collection from original destination
- Return to store
Rewiring the way you do e-commerce may seem daunting at first, but consider this: 89% of US retailers in the electronics and appliances category saw a reduction in cart abandonment when shipping options were added, 48% of U.S. shoppers have admitted to increasing their size of their order to hit free shipping thresholds, and 66% of shoppers stay loyal to a brand with good customer experience in the last year.
Two best-in-class retailers in this category, Best Buy and Apple, have found the right mix in the American market to be successful. From optimizing their multichannel presence, to managing inventory well, to removing barriers to purchase, these leaders show that true innovation pays. With B2C e-commerce estimated to contribute almost 2% to the GDP by 2018, what you do today will pave the way to your success tomorrow.
Temando is a provider of shipping and fulfillment software.