ECommerce Trends in 2016: A Year in Review

This has been a whirlwind year packed with events and digital shifts felt worldwide by everyone, especially retailers. New technologies such as virtual reality and artificial intelligence have stormed on the retail scene while political stirs created a climate of uncertainty for big economies around the globe, raising questions concerning cross-border sales, lifted trade barriers, and more. Despite uncertainties, this year in commerce shattered records, giving retailers reason to rejoice.

By the end of December, the eCommerce share of U.S. retail sales is set to surpass 8%, totaling just over $398 billion. Out of many different retail sectors, home goods and apparel retailers are still leading the pack, while dollar and drug stores lag with lower online sales numbers.

Globally, total retail eCommerce sales will close out around $1.9 trillion this year, an 8.7% increase since 2015. Increased spending from existing digital shoppers has fueled this along with the expansion of new shopping categories (grocery, travel, etc.), and a boom in mobile sales.

In January, we sat down and researched what we thought would be the five biggest eCommerce trends in 2016; now, we look back chuckling at a few of our hunches and nodding at the eCommerce trends that did outstandingly well.

1. Mobile Growth

For eCommerce trend spotters, 2016 was another record year for mobile purchases-not surprising given the expansive adoption of responsive designs, personalization strategies, constant growth of the smartphone user pool, and buy buttons launched on many social media platforms.

Smartphone sales in the U.S. alone jumped from $37.7 billion in 2015 to $67.2 billion this year - a 78% increase year-over-year. And that's just a preview for 2017, with total smartphone sales expected to land near $101 billion (eMarketer). In fact, mobile shopping's share of total retail sales in 2016 more than doubled 2014's total, a trend that's showing nothing but continued upswing for years to come.

By June of this year, smartphones delivered more mobile transactions (over tablet) in every major market around the world (Criteo). Mobile ad spend alone surpassed $100 billion globally, accounting for more than 50% of all digital ad spend for the first time. Mobile app shoppers have played a large part in this, driving a large portion of mobile purchases - they make conversions at 3x the rate of mobile web shoppers (Criteo).

2. Online Grocery Shopping & Delivery

Evolving shopper attitudes and innovations in digital grocery shopping have made 2016 a big year for online grocery shopping [Attachment] and delivery. The niche is becoming mainstream, with online sales growing by 15% in the past year. Worldwide sales are projected to reach approximately $48 billion by year end. In the U.S. alone, online sales are expected to increase by a total of 157%. Even emerging markets like Brazil and South Korea show growing online sales for grocery due largely to convenience - though this also varies by city, depending on local availability (Internet Retailer). Globally, the top three markets are Japan (with online grocery sales accounting for 7.2% of digital sales), the U.K. (6.9%), and France (5.3%).

Keep an eye out, retailers and shoppers. As big merchants with international locations work aggressively to expand their digital grocery offerings, smaller yet quickly growing businesses with innovative models and meal kit options (think Blue Apron or Thrive Market) are gaining traction with shoppers hungry for groceries with an interactive spin.

3. Cloud Computing

Cloud computing has been gaining steam for about five years now, but 2016 was a tipping point in commerce. Today, all major commerce platform providers lead with cloud offerings - IBM, Magento, Oracle, Salesforce Commerce Cloud, and SAP Hybris. Yes, flexibility is still key - some enterprises prefer their own hardware and software on premise ­­- ­­but cloud offerings have gained deeper traction as more commerce enterprises embrace the style of computing. In fact, Gartner called 2016 the 'defining year' for cloud. Nearly half of large enterprises are expected to deploy hybrid cloud offerings - a combination of public and private cloud platforms - by the end of next year.

A key driver propelling cloud adoption in commerce is an increasing dependence on data, customer insights, and the need for a 360-degree view of operations and customers. The cloud has democratized access to enterprise resource applications as back-office data becomes more essential to front-office operations. Moreover, the cloud is better equipped to scale and host the massive amounts of data retailers require to turn insight into action.

4. Emerging Technologies

This year, emerging technologies took flight - and not just the drones that started delivering 7-Eleven Slurpees this past July. Artificial intelligence (AI), Internet of Things (IoT) and virtual reality are making their way onto the commerce scene as more consumers think and act with technology.

Artificial Intelligence

Although AI has been around for a while, the technology took a leap forward into 2016 with self-driving cars and voice-based search devices to name a few headlines. In the world of commerce, major technology players are spotlighting the smarts of their AI platforms, including IBM's Watson, Salesforce Commerce Cloud's Einstein, and Amazon's Alexa. And, in a move to capture AI market share, Microsoft in August acquired Genee, an AI-powered scheduling assistant. It all boils down to creating better shopping experiences - more personalized, more connected, faster, simpler, and fun. And, if you listen to industry experts, 2016 is just the tip of the iceberg with AI an eCommerce trend just now taking root.

Virtual and [Attachment]Augmented Reality (VR/AR)

Virtual and augmented reality is being called as the next frontier in commerce, offering consumers new ways to interact with products. This year, VR/AR played a major role in retail on two fronts - as marketing and sales tools, and as products to be sold. In fact, demand is increasing beyond entertainment and gaming applications. The current worldwide revenue for virtual reality hardware, for instance, is forecast to reach $5 billion by year end, which pales in comparison to the $50 billion market total projected for 2021 (Juniper Research). Also, it's worth noting that smartphones manufactured today are VR-enabled. Endowed with the right screen resolution and processing power, these devices are likely to lead the way to a new retail reality.

Internet of Things

Millions of devices are being connected in commerce environments to collect and send data that provides valuable insights and the opportunity to personalize and improve customer experience. Amazon's Dash Button lets consumers reorder their favorite products with the press of a button. Smart shelves monitor inventory in stores and notify managers when items are running low. Smart mirrors let customers virtually try on clothes. Last year, more than half of retailers worldwide told Retail Systems Research that they believed the technology was 'poised to dramatically change the way companies do business in the future.' This year, more than one-third of executives polled by Deloitte said their companies were actively deploying IoT, while nearly 20% described their company's efforts were already at the mature stage. One year proved to be the difference between thinking and doing.

5. B2B

Walletless payment, mobile access, personas, market places, and AI - 2016 was the year when B2B more fully emulated B2C than ever before. Consider this: close to 47% of total B2B sales were eCommerce-based; half of all B2B sellers now have a responsive site; and click-to-chat features are twice as common as a year ago (eMarketer). The new B2B buyer is educated, social and doesn't require face-to-face contact. In fact, 84% of B2B marketers used social media to acquire new customers, while 75% of B2B buyers say they are influenced by social media (eMarketer). Business-to-business used to mean face-to-face, but not anymore - technology ruled in 2016.

Watch this space for our 2017 predictions. We're getting out the crystal ball again and we'll provide a look at technologies and eCommerce trends to watch next year. In the meantime, happy holidays from all of us at PFS.