Clothing and accessories became the largest e-commerce category last year for the first time, outstripping computer hardware. In 2015, consumers spent $51.5 billion on clothing and accessories (which include shoes, bags, makeup, and so on); in the same year, consumers only spent $49.9 billion on desktops, laptops, tablets, monitors, keyboards, and other computer-related products via online vendors. Digital sales have been growing yearly, however clothing sales have increased at a faster rate than other sectors' (19% alone in 2014). What is behind this shift in consumer behavior?
A new study published this week by the analytics firm comScore has concluded that the change has come about as a result of expanding free shipping policies and the rise of mobile shopping. Services such as Amazon's (NASDAQ: AMZN) "Prime" membership, which costs $99 per year, make it much easier for subscribers to continuously purchase smaller items without worrying about the added cost of shipping. This often leads to an increase in spending, as products that need to be replenished-cleaning supplies, foodstuffs, etc.-can now be increasingly ordered online conveniently and guilt-free. In fact, Prime members spend double the amount of money online over the course of a year compared to non-Prime members. Setting a low-but-not-too-low cost barrier to free shipping has also been a very successful method for tempting consumers to buy more than they otherwise might; one may be more likely to buy $30 worth of merchandise with free shipping as opposed to $21 with shipping, for example. The thought behind this kind of spending behavior is that the money that would have otherwise been "lost" in shipping expenses is now being "saved" by purchasing another product-in reality, of course, this logic does not hold, as money spent in either scenario is nevertheless money spent. Additionally, more and more consumers are shopping from their handheld phones; purchases made from phones and tablets totaled $15.6 billion in the fourth quarter of 2015, compared with $10.7 billion during the same quarter in 2014. Consumers that use their phones to online-shop also more likely to purchase items that are not complicated, require no insurance, and require fewer decisions to make: all of which contributes to the rise of clothes shopping done via mobile devices.
However, it is not only the increase in free shipping policies and mobile online shopping that has contributed to clothing becoming the most-purchased commodity online. As clothing becomes cheaper, fashion becomes more fluid-new styles can make a splash on social media one day, and be churned out relatively cheaply the next. And the less expensive one's clothing becomes, the more disposable it becomes; many consumers can now consequently afford to buy new pieces of clothing every few weeks, as opposed to once every few months. A number of apparel retailers have capitalized on this trend, ranging from slightly pricier stores such as Zara and Urban Outfitters (NASDAQ: URBN) to less expensive vendors such as Forever21 and H&M (STO: HM-B).
Ultimately, we can expect this trend to continue in the coming year. Users are unlikely to stop using their phones to shop-in fact, they are only more likely to do so, as phones become increasingly user-friendly as well as trusted with one's credit card information. Likewise, free shipping (and perhaps even more importantly, the promise of free returns) has proved to be a very successful marketing tactic-and such a lucrative strategy is quite unlikely to be dropped, as long as it remains as such.