Cause for alarm

Cause for alarm

Internet Retailer surveyed more than 500 U.S. online shoppers about how, where and when they shop online, and their answers illustrate just how cutthroat e-retailing is getting for merchants.

Talk about being on-trend: Color It, a maker and purveyor of coloring books for adults, turns 1 this month, and has sold $1 million worth of the books exclusively online.

Co-founder Mike Jackness says hitting these marks would have been impossible without the existence of Amazon.com Inc. and online shopping. Jackness, though, isn’t an Amazon acolyte. He’s pragmatic, and understands that more U.S. online shoppers look to Amazon first than any other e-retailer. That’s borne out by the results of Internet Retailer’s first-ever survey of U.S. online shoppers about their web shopping habits: 90% of respondents said they were Amazon customers. Tellingly, 51% said they made more than half of their online purchases in the last 12 months with Amazon.

That’s why it made sense for Color It to debut its first title on Amazon last June, seven months before ColorIt.com began taking orders. It was also right on time to capitalize on the adult coloring book market, which exploded last year. The Nielsen Co.’s BookScan service estimates U.S. consumers bought 15 million coloring books for adults last year, up from 1 million in 2014.

“The way we launched the brand is on Amazon,” Jackness says. “This is an unprecedented time in history, especially online. To start a coloring book company before Amazon was a big, million-dollar venture. You needed a whole catalog before you could sell your first book.” But Color It debuted its first book on Amazon a mere handful of months after Jackness, his cousin (the artist behind the books) and other family members decided to get into the adult coloring book business. It printed a limited quantity, listed the book for sale on Amazon as a marketplace merchant, and the sales and reviews started rolling in. The team used the feedback from reviews to refine the product before committing to a bigger production run, creating more titles (it now has 12) and launching ColorIt.com.

“Consumers are discovering us on Amazon,” he says. For a company like Color It selling its own products and not having to compete with other merchants selling identical products, selling on Amazon “is just found business,” Jackness says. Today, about 45% of Color It sales come through Amazon, and 55% from ColorIt.com, as the company makes branding and advertising investments, particularly on Facebook, Jackness say.

Color It’s example demonstrates the power of Amazon today to rewrite retailing and move the market. U.S. consumers spent $341.7 billion on retail goods online last year, per U.S. Commerce Department estimates, accounting for 10.6% of total retail sales of $3.22 trillion, up from 9.7% in 2014. (These figures factor out the sales of goods generally not available for sale online, such as automobiles, fuel and restaurants.) Amazon reported $63.71 billion in North American net sales in 2015 (it doesn’t break out sales for the United States separately). Those are just products Amazon sells itself. Adding in the sales of marketplace sellers and estimates of the value of goods sold to U.S. consumers via Amazon range from $100 billion (Forrester Research Inc.) to $112 billion (ChannelAdvisor Corp.). In short, Amazon accounts for about 30% of U.S. online retail sales. Macquarie Research estimates say Amazon’s gross sales—sales made by Amazon and by other merchants selling on Amazon—in 2015 accounted for 24 cents of every $1 of retail sales growth. Within e-retail, it calculates Amazon commanded 51 cents of every $1 in sales growth.

Amazon’s pervasiveness and its outsized role in U.S. shoppers’ online shopping habits is evident from the results of the Internet Retailer 2016 Online Shopping Survey, which 535 U.S. adult online shoppers took online in late April. The survey examined consumers’ online shopping frequency, their responsiveness to common e-retail marketing tactics like free shipping, mobile shopping and the role online research and online retailers play in their overall purchase path. When the results are further filtered according to consumers’ shopping frequency on Amazon and whether they are members of Amazon Prime—Amazon’s $99 annual membership program that provides free fast shipping and a host of other perks including streaming video—the results put the steep uphill battle e-retailers and retail chains face into sharp relief.

First, the good news: Just more than half, 51.6%, of U.S. online shoppers, say they place at least two orders online each month, and 63.9% of shoppers say they shop more online than they did three years ago. (28.8% say their online shopping frequency has stayed the same and 7.3% say they shop less.)

When factoring in Amazon Prime mem­bership—which 59.4% of the respondents who said they shop Amazon have or have access to through a household member—64.8% of Prime members say they place at least two orders online each month, and 71.8% say they shop online more frequently than three years ago.

Examined through the lens of frequent online shoppers (those placing orders online twice a month or more), the Amazon tilt is even more evident. 94.5% of these consumers say they are Amazon customers, and 71.0% report access to a Prime membership. 73.6% say they shop more online now than they did three years ago, and—here’s the e-retailer wake-up call—54.8% of frequent shoppers say they made 51% or more of their online purchases over the last 12 months on Amazon. Factor in Prime and frequency, and 77.7% shop more online now than three years ago, and 63.6% say they made 51% or more of their online purchases over the last year on Amazon. Breaking down that 63.6% figure further, 34.2% say they made 76-100% of their purchases on Amazon, and 29.4% report making 51-75% with Amazon. These figures show that Prime membership makes consumers coalesce their online shopping with Amazon.