If You Thought Digital Commerce Was on A Tear, You’re Right. Here Are the Numbers

Online commerce gets a lot of attention these days, but just how much of the retail economy in North America does it account for? The answer is 7%, according to a report released Tuesday by Boston-based researcher Aite Group. That’s accounting for all e-commerce sales as well as browser-based and in-app volume on mobile devices, which together constitute what the report calls digital commerce.

That 7% slice, however, is up from 4% in 2010 and will grow to 11% by 2020, forecasts the report, “Digital Commerce in Northern America: Growth And Opportunities.”

Recently, startups like Stripe Inc. that are focused on mobile payments on the Web and in apps have been rewarded with rich valuations, and the Aite report shows why. The mobile component of digital commerce will total $78.9 billion this year, a 39% increase only since the end of 2015. That growth isn’t slowing. The market will expand to $109.7 billion next year, the report predicts, and to $295.2 billion by 2020. That’s an average annual rate of increase of 39% through 2020.

All told, digital commerce will total $406.3 billion by the end of the year, up 15% from $352.7 billion in 2015. By the end of 2020, that total will be $715.6 billion, the report predicts. As of 2015, mobile accounted for 16% of North American digital commerce, while cross-border e-commerce by North American consumers controlled 15%. Domestic e-commerce accounted for the rest.

As for cross-border activity, those consumers are showing a rapidly growing appetite for overseas goods. North Americans buying from online merchants in the rest of the world will account for $62.2 billion in sales this year, increasing to $122.6 billion in 2020, the report forecasts, for an average annual growth rate of 18.5%. While the report covers North America, the United States plays a lopsided role, accounting for 97% of all digital commerce in the region.

For all its dynamism, though, the market isn’t without challenges, particularly for merchants. The seamless stitching together of in-store, in-app, and online processes—what is popularly known as omnicommerce—is a “myth,” the report says, at least for now.

“Many retailers have a long way to go before they achieve this vision,” authors Talie Baker and Thad Peterson say. Another challenge lies in the encroachment of China’s AliExpress (part of Alipay) and Japan’s Rakuten, which the report says are starting to “sell more aggressively” in North America, the report says. “While merchandise quality may be lower and overnight or same-day delivery is not possible now, their competitive advantages are variety and price, and there’s a real risk of disruption in the digital retail space as these companies enter the market,” according to the report.

Also, factors like cart abandonment and false declines continue to plague e-commerce. And payment processors can’t afford to be beguiled by the growth in digital commerce, ignoring the other 93% of the payments market, warns Peterson, a senior analyst at Aite. “You can’t abandon the physical world,” he tells Digital Transactions News.