E-Commerce Is Boosting This Hidden Part Of The Retail Market

You’ve no doubt heard scary stats about how e-commerce is snatching the retail market away from brick-and-mortar stores. Here at CrediFi, we’ve pointed out that this doesn’t have to spell doom and gloom for commercial real estate given that a loss for the retail property segment could be a gain for other property types, such as light industrial (especially given the warehousing needs of online retailers). Now, a recent Pacific Standard article offers a glimmer of hope from a surprising place: the practice of returning goods we don’t like, which has given rise to a secondary market in the U.S. whose rapid growth is closely tied to that of e-commerce.

First those scary stats, though.

E-commerce’s share of total quarterly retail sales has risen steadily year after year since 2000, according to Census Bureau data. In Q3 2000, e-commerce generated $7.3 billion, just 1% of total retail sales for the quarter. By Q3 2010, that number had risen to $43.5 billion, or 4.6% of quarterly retail sales (on an adjusted basis). And, in the third quarter of this year, e-commerce generated $115.3 billion, accounting for 9.1% of retail sales for the quarter.

The power of online retail is especially clear on major American shopping days like Black Friday and Cyber Monday.

Last year, e-commerce raked in $3.34 billion in online sales on Black Friday, not only growing 22% year-over-year but also making e-commerce history as the first day to generate over $1 billion in online sales from mobile devices, according to Adobe Digital Insights data from about 18 billion visits to retail websites. That dollar amount went even higher on Cyber Monday 2016, when online sales tallied $3.45 billion, a growth rate of 12%.

But here’s a lesser-known fact about e-commerce: It is a significant contributor to the secondary market – the second wave of retail that happens when goods sold in a store like Macy’s or Walmart are unwanted or returned. Players in this secondary market includes wholesale and salvage dealers, flea markets, outlet stores, dollar stores, online auctions like eBay, and value stores such as Marshall’s and T.J.Maxx, Andy Kroll wrote in an article for Pacific Standard’s November issue.

How significant a contributor is e-commerce? While 8-10 percent of all goods bought in the U.S. are returned, that share rises to 25-40 percent for online sales, the article reports. It notes that returns are much more common in the U.S.  than in Europe or Asia.

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