A Research Service By Business Insider THE FUTURE OF RETAIL: 2015

Retail is changing. Source: Flickr / Joseph Brent

Digital is changing the way people shop. Source: Flickr / Joseph Brent

We define “digital commerce” as purchases that are made on desktop and mobile computers. Source: US Economic Census

Nearly all growth in retail now comes from this segment. Source: US Economic Census

So what’s driving digital commerce growth? Source: US Census, BI Intelligence

Consumers are using smartphones and tablets more as purchasing devices. Source: US Economic Census, comScore

Social networks are now driving more e-commerce than . Source: AddShoppers, Internet Retailer, BI Intelligence Estimates

And shopping sites have gone global, allowing people to shop wares from all around the world. Source: Company Filings, BI Intelligence Estimates

From a macro perspective, digital commerce may not seem like much compared to in-store retail. Source: US Economic Census, comScore

But look closer, by product category... Source: US Economic Census, BI Intelligence

And you’ll see that e-commerce is booming. Source: US Economic Census, BI Intelligence

The “Media, Sporting, and Hobby Goods” Category is leading the way. Source: US Economic Census, BI Intelligence

Over 50% of these sales in the US now occur online. Source: US Economic Census, BI Intelligence

And digital media has become the fastest growing e-commerce category in the US. Source: ComScore 2015

The “Electronics” category isn’t far behind. Source: US Economic Census, BI Intelligence

Over 50% of these sales in the US now occur online. Source: US Economic Census, BI Intelligence

Leading to the decline of some traditional retailers. RadioShack filed for bankruptcy in early 2015 after 11 consecutive quarterly losses; the company has since been bailed out by Sprint.

The “Apparel” category is close behind. Source: US Economic Census, BI Intelligence

Approximately one-fourth of apparel sales in the US now occur online. Source: US Economic Census, BI Intelligence

But younger shoppers still prefer the flexibility of shopping for clothes at stores and online. Source: Piper Jaffray

So while many traditional apparel retailers are holding on by a thread, the ones that survive will be those that diversify into e-commerce. Source: Shutterstock

Let’s see how those traditional apparel retailers are faring... Source: AP

JCPenney relies way too heavily on in-store sales, which account for 99% of its business. Source: JCPenney, Internet Retailer, BI Intelligence Estimates

And JCPenney’s growth has been inconsistent, trending downward overall. Source: JCPenney, Internet Retailer, BI Intelligence Estimates

Gap’s business is much more diversified than JC Penney’s; 15% of Gap sales come from digital. Source: Gap, Internet Retailer, BI Intelligence

And although Gap’s growth is decelerating, it’s still trending upwards overall. Source: Gap, Internet Retailer, BI Intelligence

Furniture has been steadily disrupted by shoppers going online to purchase home goods. Source: US Economic Census, BI Intelligence

Digital now accounts for 28% of furniture sales in the US. Source: Us Economic Census, BI Intelligence

Now the categories with the greatest potential for disruption… Source: Flickr/Foad Hersi, Jamie

Health and Personal Care is on deck to be completely disrupted by e-commerce. Source: US Economic Census, BI Intelligence

Americans today spend over $300 billion a year buying health and care products. Only 7% of that is done online. Source: US Census, eMarketer, BI Intelligence

But by 2020, digital will account for $1 in every $10 spent on health and care products. Source: US Census, eMarketer, BI Intelligence Estimates

That’s nearly $40 billion. Source: US Census, eMarketer, BI Intelligence

Among health and beauty shoppers, Amazon is the most popular e-commerce destination. Source: AT Kearney, 2014

Four out of ten online health and beauty shoppers use subscription services to refill products they need. Source: AT Kearney, May 2014

Birchbox capitalizes on this and generates over a quarter-billion dollars every year from its beauty subscription business. Source: News Announcements, BI Intelligence

But Amazon is the most popular e-commerce destination for everyday products. Source: comScore

Groceries are the biggest opportunity in e-commerce. Source: US Economic Census, BI Intelligence

Americans spend $600 billion a year buying groceries, but less than 1% of that is online. Source: BI Intelligence

Demand isn’t the issue. Consumers of all ages are willing to try grocery e-commerce services. Source: Nielsen

And cultural differences aren’t the issue either. Demand spans all geographic markets. Source: Nielsen

Source: Lonely Planet via Getty Images So what is holding back digital from disrupting groceries?

The issue is that consumers don’t have the option. Only 5% of supermarkets offer mobile ordering. Source: AppLovin, July 2014

And we know that consumers want to order groceries on mobile. Source: PricerwaterhouseCoopers, October 2014

Consumers spend more money when buying groceries online than if they were in a supermarket. Source: Greycroft Science, Earnest Research

And online grocery shoppers make multiple orders per month. Source: Greycroft Science, Earnest Research

Especially those repeat customers. Source: Greycroft Science, Earnest Research

Online grocers, such as FreshDirect, are generating 2x more money per customer per month than traditional supermarkets. Source: Greycroft Science, Earnest Research

We estimate that Instacart will handle $600 million a year in online grocery orders by Source: News Filings, BI Intelligence

Now let’s look at how the mass merchants are faring: the retailers that sell all of these products.

Amazon’s growth has decelerated; but it’s still outperforming competitors. Source: Amazon

eBay is in a downward spiral. Source: eBay

Walmart still relies heavily on brick-and-mortar sales. Source: Walmart, Internet Retailer, BI Intelligence

As does Target. Source: Target, Internet Retailer, BI Intelligence

But Target leads Walmart when it comes to e-commerce. Source: Target, Walmart, BI Intelligence

Conversion rates are rising on mass merchant e-commerce sites, which means that shoppers aren’t just browsing online, they are buying. Source: Kantar Retail ShopperScape, December of each year

And digital isn’t just disrupting how people shop, it’s also changing the way they receive their purchases. Source: Flickr, US Department of Labor

Consumers are demanding faster delivery. Source: Stony Brook University

So retailers are getting competitive with lower thresholds for free shipping. Source: Company info *Note: As of February 24, 2015

The demand for fast shipping has benefitted on-demand delivery startups like Postmates. Source: Postmates, BI Intelligence Estimates

Retailers and shippers will look to technology to lower the cost of delivery, which is why companies—from Google to Uber to Amazon—are interested in autonomous vehicles. Source: ARK Research*Estimate for the year 2020

And they’ll also look to technology to help increase the speed of delivery. Source: ARK Investment Management, Company info*Launch date unknown, and delivery fee is an estimate

It’s technology that is driving the digital disruption of retail.

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