Online's on the mark
Holiday season to keep feeding e-commerce's rapid growth
Dwayne Mitchell hadn’t ventured into Amazon’s vast online shopping world until he ditched his flip phone and upgraded to an Android model about five months ago
The 52-year-old air-conditioner installer from Houston downloaded the e-commerce giant’s mobile app and, in a matter of minutes, he said, ordered tennis shoes and a hands-free gadget for his phone at a steep discount. This holiday season, he expects to skip the in-store hunt for gifts and instead rely on the device he now keeps in a holder on his belt.
“I love it,” he said. “I don’t have to be looking and looking and looking.”
The surge in online shopping around the holidays, by now a familiar story, has growing consequences for brick-and-mortar retailers. Online sales are expected to grow more than 17 percent this season to $94.7 billion, according to eMarketer.
That’s the highest projected increase since 2011, and the forecast far outpaces growth projections for overall retail sales, which eMarketer expects to rise 3.3 percent to $884.5 billion this season. If e-commerce sales jump as anticipated, they would account for more than 10 percent of holiday retail sales for the first time this year.
“The 10 percent is a notable marker, a watershed moment for e-commerce,” said Yory Wurmser, a retail analyst for eMarketer. “But what’s more important is not that it has crossed that border, but that’s it’s growing as fast as it is.”
Shoppers like Mitchell are expected to drive much of that
growth. EMarketer has predicted sales through mobile phones and Amazon.com will continue to push other retailers to enhance their online shopping options to meet consumer demand for speed and convenience.
For the workhorses of the holiday season, that means pressure to handle and deliver more packages more quickly. FedEx and UPS aren’t expected to hire more people than last year, but both have invested in technology to improve the efficiency of their systems.
UPS spokesman Dan McMackin said the company plans to add about 3,370 seasonal workers in Houston, one of its key markets. Late last year, the company received a $5 million tax break from the City Council to expand a distribution center on Houston’s north side.
McMackin said the company, which starts preparing for the holiday rush as early as January, has been revamping regional hubs across the country with new technology.
“We’re putting (capital expenditures) to work in terms of improving throughput,” McMackin said. “That tells you a little about the rise in e-commerce. I don’t know about you, but that’s where I get my stuff.”
For several major retailers, the rush to prepare for an onslaught of online orders has shifted seasonal hiring plans. Though many companies are bringing on as many or fewer workers as last year, Chicago-based outplacement consulting firm Challenger, Gray & Christmas expects jobs in the transportation and warehouse sector to increase this season.
CEO John Challenger said that shift likely will influence how retailers market their job opportunities.
“There is a certain kind of safety and show-like quality to being out in the public at a retail store, with customers shopping, and some people might feel it just doesn’t feel the same to go work in a warehouse,” Challenger said. “Now, (retailers) are going to have to help people understand that working in a warehouse is a good idea and that their skills will translate in these environments.”
Search marketing agency NetElixir expects Amazon.com to account for 28 percent of all online sales this season, up from 25 percent last year. That e-commerce site has announced plans to hire 120,000 seasonal positions across the U.S., including Texas, up from 100,000 temporary jobs last year.
Other sites are also ramp- ing up their hiring. Shop.com, which allows shoppers to quickly compare prices across online retailers, is planning to hire about 10,000 people to staff its distribution facilities and serve as virtual sales helpers for customers.
That’s twice the number it hired last year, said Peter Gold, chief marketing officer for Shop. com and Market America. He attributed the increase in part to the company’s effort to adopt certain features of brick-and-mortar stores.
“One of the big differences between online and offline is you go to interact with a human in the store,” Gold said. “We’ve come up with this hybrid model of using humans to assist shoppers online.”
Minneapolis-based retail giant Target plans to add 70,000 temporary workers this season, 6,600 of whom will staff positions in Texas. That’s about the same as last year, but the company anticipates its distribution and warehouse positions will rise to 7,500, up from 6,500 in 2015.
Target spokesman Eddie Baeb said that increase reflects the company’s expectations for e-commerce demand as well as changes in its store processes. The company plans to double the number of stores that will serve as makeshift warehouses of sorts to ship online orders to nearby destinations, which can cut down on costs and transit time from warehouses.
The company has also rebuilt its e-commerce site this summer to better support the surge in holiday orders. Last year, the old Target site couldn’t handle traffic spikes on peak days like Black Friday, Baeb said.
“We hope and believe this new site can stand up to more traffic and checkout volume than our last site did,” he said. “We’ve been pressure-testing like mad because we know it’s so important to get it right in the fourth quarter.
Mobile shopping has driven much of the company’s e-com- merce growth. Baeb said mobile sales in 2015 doubled compared with the prior year and accounted for more than half of online sales during peak shopping days.
EMarketer’s Wurmser expects such growth to sweep the retail industry. The firm expects mobile shopping to account for nearly $116 billion in retail sales for the entire year, up from about $81 billion in 2015, an increase driven by larger and more powerful smartphones.
“In part, that’s why we’re expecting e-commerce to grow very rapidly for the next several years,” Wurmser said.
Houston-based Stage Stores, which operates retailers including Palais Royal and Bealls, has also seen an uptick in mobile shopping. It has been working to ensure its site works across all platforms as part of a strategy to expand its online presence this year, said Bill Gentner, the company’s chief marketing officer.
“What we know is if we can engage the customer across all the platforms and then get her into the store, it becomes a much stronger relationship between us and her,” he said.
IHS Global Insight also noted the growing strength of online retailers in a recent report that forecasted this season’s holiday sales growth to outpace last year’s. But most holiday transactions still take place in stores, despite the projected increases in online sales.
For Andre Malone, a Houston resident who typically does part of his holiday shopping online, said there are certain things he’ll trek to the mall to get. He might buy a gift for a guy online because he’s familiar with those sorts of products, he said, but for the ladies, he’s not as likely to click and order.
“I prefer seeing it in person and going to the store and picking it up,” he said. “But it depends. What’s my goal? What’s my price?”
“One of the big differences between online and offline is you go to interact with a human in the store. We’ve come up with this hybrid model of using humans to assist shoppers online.” Peter Gold, chief marketing officer for Shop.com and Market America