The past two decades have ushered in a new era of technology and information and, with that, the way we shop has dramatically transformed. Window shopping is now confined to the borders of a browser, and brick and mortar stores have become walk-in catalogues for future online purchases. Few people expected the internet to transform the face of retail as we know it, but online shopping has become firmly established as a cultural norm, fundamentally reshaping the landscape of commerce. The entire consumer world feels like it's been shaken up multiple times in very recent history, and much of these shifts have been undeniably catalyzed by breakthroughs and innovations in technology. We are still entrenched in a time of change, but it is apparent already that this new world of commerce created a host of opportunities for companies to capitalize on, but also provided rapid changes in the currents of consumer demands that other companies may ultimately prove unable to navigate.
In 2015, online sales accounted for more than a third of total retail sales growth, according to data recently released by the U.S. Commerce Department. When factoring out items almost never purchased online such as fuel and automobiles, e-commerce accounted for more than 10% of all of retail sales. The growth and proliferation of e-commerce has been fueled by increased consumer demand for convenience, instant gratification, and constant access. The obvious champion of this new world is Amazon (NASDAQ: AMZN), and it has, in many ways, redefined what consumers demand in the shopping experience. In this new world of commerce, consumers expect more for less, as retailers increasingly lure them with a variety of new ways to shop in person and online, with added bonuses such as free shipping. Outside of the major platforms such as eBay (NASDAQ: EBAY) and Amazon that have come to define online business, several key retail companies have been able to successfully capitalize on this new environment. Notably, Home Depot (NYSE: HD) and PetSmart (NASDAQ: PETM) seem to have found the ability to implement strategic plans for growth throughout the changes in the industry.
The revolution of e-commerce meant that field for selling non-urgent, practical items was now exposed to exponentially more competition via the online market. Observing this, Home Depot has successfully navigated these waters with an increased focusing on identifying and categorizing the aspects of their business suited for an online vs in-store experience. They decided on a limiting the in-store assortment to mostly private label products where price comparison is not possible. In addition, by maximizing the floor space of stores to offer products that many consumers can't wait to receive by delivery, such as urgently needed toilet and refrigerator parts. Home Depot ensures they carry enough inventory for consumers to get their job done quickly. Many less urgent product offerings have been migrated to the online ecosystem, and for products related to more elaborate projects such as lighting fixtures, they carry a selection of good, better, and best options in-store along with the electrical supplies and tools you needed to install the fixture. The Home Depot Inc. built up its online sales in its first fiscal quarter of 2016 by more than a fifth (21.5%) over the year-earlier quarter, as total sales grew by 9.0%, the home improvement retail chain says.
Facing competition not only from traditional retailers such as Walmart (NYSE: WMT) and Target (NYSE: TGT), supermarkets and grocery stores, but also online retailers such as Amazon, eBay, PetSmart saw the online threat early and built a strategy to insulate themselves from the damage that e-commerce could inflict by refocusing the power of the brand towards an offering of services not available online. Today, almost a third of PetSmart's sales are in services, things like grooming and extended care--sales that are not threatened by the Internet. And while the pet owners waits for the services to be completed, PetSmart provides an array of in-aisle products and accessories designed to drive impulse purchases. At the same time, they've maintained a strategy of exclusivity with pet food to avoid stocking the same items that Walmart and the supermarket carry.
Other companies such as Barnes and Noble (NYSE: BKS) face a much more perilous future in the new world of e-commerce; not only is the Internet more efficient at what those stores sell, what they sell may no longer needed by the customer. With books and related products increasingly available in digital format and online, Barnes & Noble Booksellers Inc., reported a 3.1% decline in total sales for fiscal 2016 that included lower online revenue. The attempt to evolve with the digital era included the introduction of the Nook e-reader and a push to become a dominant force in online and digital book distribution. This push, however, may have been too little too late as they were forced into much more direct competition with Amazon's established consumer base as well as a crowded marketplace for digital readers including Amazon's Kindle and Apple's (NASDAQ: AAPL) iconic iPad.
The advent of e-commerce has already shaken up much of how we see retail operate in today's world, and much more change may come in the future. With the high profile rise of China's online marketplace Alibaba (NYSE: BABA) along with a number of recent trade deals, the international world of e-commerce may be poised to be blown wide open as consumer's direct access to manufacturers from around the world increases exponentially. It's easy to see that we are in many ways still embroiled in one of the most turbulent retail environments, and the way the consumer landscape might change in the future is still wide open.