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Tech Disruptions In Retail, Transport, Media

Delivered May 16th, 2019. Contributors: Hanine, Billy, Rachael and

Part
01
of three
Part
01

Amazon's Impact on Retail Market

In 2018, retail sales in the United States was $6 trillion out of which, 9.9% were done online via e-commerce retailers such as Amazon. Thus, between 2000 and 2018, online retail sales have grown 300%, causing the closing of 9,400 brick and mortar stores in 2017.

Traditional vs e-commerce retail market

Amazon started in 1994 as an online bookstore. In 1998, Amazon expanded its retailer services to cover videos and music. Prior to this step, in 1997, the retail market sales were $2.610 trillion in the United States. A year after, the retail sales reached $2.994 trillion in 1999, out of which, only 0.6% were done online via e-commerce retailers such as Amazon.

In less than 20 years, Amazon was able to get a place in the retailer leader board skyrocketing from no. 157 in 2001 to no. 6 in 2016. The leader board included Wal-Mart, Carrefour, Ahold, Home Depot, Kroger, Metro, Target, Albertson’s, Kmart, and Sears in 2001. The updated list of 2016 included Wal-Mart, Costco, Kroger, Schwarz Group, Walgreens Boots Alliance, Amazon, Home Depot, Aldi Group, Carrefour, and CVS Health.

According to the United States Census, retail sales reached $4.4 trillion in 2007. After the recession in 2009, it recorded a decrease in sales accounting $4.06 trillion. In 2018, retail sales in the United States was $6 trillion out of which, 9.9% were done online via e-commerce retailers such as Amazon.

Thus, between 2000 and 2018, the online retail sales have grown 300% according to the United States Commerce Department. "In 2016, $1.26 trillion of retail sales were influenced by digital media. The firm projects that mobile devices alone are going to influence $1.4 trillion in local sales increase by 2021. And so, experts began to talk about the Amazon Effect."

Amazon effect

Since its beginning in 1994, Amazon has changed the traditional retail market introducing a faster and simpler online shopping process. Amazon-like stores became a global trend aiming to save consumers' time and effort in mobility.

Amazon affected the traditional retail market in two different ways: by hitting the traditional retail stores' revenue and by leading to significant changes in the market's consumer shopping behavior and patterns.

"Today’s traditional brick and mortar retailers are facing extensive change and like many other industries are seeing market share taken by online outlets." Online retailers like Chewy and Amazon are bringing the consumers-needed convenience to meet their busy schedules. To survive the Amazon Effect, a physical retailer outlet must become more specialized showcasing "products that cannot be found elsewhere."

Amazon Effect: traditional retail sales

"Among other factors, the Amazon effect is cited as the primary reason street-based stores' declining sales, which have often foreshadowed the stores' eventual closure. A WWD report cited more than 9,400 store closings in 2017, up 53% from the number that shut in the wake of the Great Recession in 2008."

Meanwhile, physical stores' sales grew by 3.7%, online retail sales in the United States increased by 15% between 2017 and 2018. Therefore, after only a decade, e-commerce now doubled its share of the retail market.

According to the United States Census Department, department store sales rose by 0.5% in February 2019 which is down by 3.5% from February 2018. This decrease is mainly due to the strong competition from e-commerce and online retailers. Therefore, online retailers' sales rose by 7.7% from the last year.
In the first three months of 2019, 5,994 retail stores closed compared to 5,864 for all of 2018. Some closed retail stores were Charlotte Russe, Payless, and Gymboree.

Amazon Effect: Consumer behavior

Online shopping experience such as at Amazon impacted the expectations of shoppers from traditional retail stores. Thus, today’s shopper expects a similar variety, the same smoothness, and timely response seen in online retailers while visiting a physical retail store.

With its technology-driven shopping experience, Amazon is prompting consumers to search for the same experience in traditional retailers. "This increased e-commerce and the manifestation of the ongoing consumer shift to online shopping resulted in the evolution and consequent disruption of the retail industry."


Lastly, due to the strong competition from e-commerce and online retailers, 5,994 retail stores closed in the first three months of 2019 compared to 5,864 for all of 2018.
Part
02
of three
Part
02

Social Media's Impact On Traditional Media

In this study, we found that 26% of American adults receive news from at least one social media website in 2017 as compared to 2016 with 18%. From 2015 to 2017, 40% of the Americans reduced their consumption of print newspapers or magazines. Below is a detailed explanation of our methodology and findings.

IMPACT OF SOCIAL MEDIA ON TRADITIONAL/PRINT MEDIA

CHANGE IN PREFERENCE OF NEWS SOURCE
 20% of the Americans get news from social media, 16% from traditional/print media, 43% from the internet including social media, and 49% from television. In 2017, the print media advertising revenue amounted to $16.5 billion, a 10% decrease from 2016. Newspaper circulation revenue increased by 3% in 2017, resulting to $11 billion from 2016. Newspaper digital advertising revenue accounted for 31% of the total ad revenue in 2017.
GROWTH IN SOCIAL MEDIA USERS
Social media use increased from 5% in 2005 to 69% in 2018. 26% of American adults receive news from over one social media website in 2017 compared to 18% in 2016. In 2017, the newspapers’ audience in the U.S. declined by 11%. In the same year, 67% of the Americans stated that they received some of their news from social media. This figure increased to 68% in 2018.
AN INCREASE IN SOCIAL MEDIA GROWTH RATE AND USE
From 2015 to 2017, 40% of the Americans cut their consumption of print newspapers or magazines. There has been an increase in the consumption of print newspapers or magazines since the beginning of social media advertising in 2005. The CAGR between 2012 and 2017 was 50.1%. In 2017, newspaper advertising generated revenue amounting to $16.8 billion, but there was a decline of $11.8 billion in circulation revenue. In the same year, social media advertising had revenue share amounting to $88 billion. Social media advertising revenue amounted to $51.3 billion in 2018.
Part
03
of three
Part
03

Rideshare's Impact on Transportation

The increased use of ridesharing apps has significantly affected the traditional transport market. From 2014 till date, the market share for taxis reduced from 37% to 5.2% and for rental cars reduced from 55% to 22.3%. The use of the ride-sharing platforms also resulted in an annual decrease of 1.29% in rail ridership and 1.7% in bus ridership across major US cities. Similarly, 63% of previous car rental customers also reduced their spending on these services, leading to a loss of $3.2 billion as many of them opted to use ride-sharing apps.

QUANTITATIVE IMPACT THAT RIDESHARING APPS LIKE UBER OR LYFT HAVE ON THE TRADITIONAL TRANSPORT MARKET

According to Certify, Lyft and Uber currently, have a 72.5% share of the US car rental market while taxis and rental cars have a 5.2% and 22.3% market share respectively. This is a major increase compared to 2014 when rideshare companies only had an 8% market share, taxis and rental cars had a 37% and 55% market share respectively. However, there was a shift in consumer preference around 2016, which lead to increased competition for the market by rideshare apps like Uber and Lyft.

According to Bloomberg, expense spending from 2018 shows that there has been a change in the market share of ground transportation as follows:

The ride-sharing market is dominated by Uber and Lyft, who account for 98% of the market. The market share of Uber is 69% while Lyft accounts for 29%. Both companies are planning to launch their IPOs and expect increased business in the future.

Ridesharing apps also have an economic impact on other modes of transportation since they result in an annual decrease of 1.29% in rail ridership and 1.7% in bus ridership across major US cities. These effects are expected to increase over time, and there should be a 12.7% decrease in bus ridership in the next eight years.

According to the US National Household Travel Survey, between 2009 and 2017 the market share for hire vehicles doubled because of the introduction and use of ride-hailing apps, which are used by an estimated 10% of Americans monthly. Similarly, Pew Research also established that in 2018, 36% of US adults used ridesharing services like Lyft and Uber compared to 15% in 2015. The use of these services is equal across all demographic groups and also includes people in rural areas.

Use of ride-sharing apps had a negative impact on the revenue and demand for car rental services. Leading companies in the sector such as Avis Budget and Hertz Global reported a 4% and 3% decrease in their pricing so that they can remain competitive to the rise-hailing trend. The same trend is also evident in corporate spending, whereby in 2015 the use of ride-hailing services by companies exceeded their use of car rental services. While Uber and Lyft payments increased by 1% and 2% respectively, spending on taxis and car rentals decreased by 4% and 9% respectively.

 63% of previous car rental customers also reduced their spending on these services, leading to a loss of $3.2 billion. Additionally, 56% of these customers stopped using car rental services and opted to use ridesharing services. According to Statista, revenues generated by the car rental industry in 2019 was $10.289 billion compared to $18.405 billion generated by ride-hailing applications. As such, the ride-hailing market is expected to grow at a CAGR of 9.3% between 2019 and 2023, compared to 1.9% for car rentals within the same period.

The current and projected market penetration rates for ridesharing apps is also higher compared to car rentals as follows:

Did this report spark your curiosity?

Sources
Sources
From Part 01

Amazon Effect

investopedia.com
Publication Year: 2018

The Changing Retail Industry and the Impact of Amazon

acg.org
Publication Year: 2018

The Amazon Effect: Amazon Go Stores and The Future of Retail

interestingengineering.com
Publication Year: 2018
w

Deloitte | Global Powers of Retailing 2018

www2.deloitte.com
Publication Year: 2018

A decade in review: Ecommerce sales vs. retail sales for 2007-2018

digitalcommerce360.com
Publication Year: 2019
w

Annual Benchmark Report for Retail Trade

www2.census.gov

Amazon.com | History & Facts

britannica.com

E-Commerce Retail Sales as a Percent of Total Sales

fred.stlouisfed.org
Publication Year: 2019

January Retail Sales Up 2.3% From Last Year

thebalance.com
Publication Year: 2019
From Part 02

Social media outpaces print newspapers in the U.S. as a news source

pewresearch.org
Publication Year: 2018

Demographics of Social Media Users and Adoption in the United States

pewinternet.org
Publication Year: 2018

News Use Across Social Media Platforms 2017

journalism.org
Publication Year: 2017

News Use Across Social Media Platforms 2018

journalism.org
Publication Year: 2018

Social Media Advertising Stats that Matter to Marketers in 2018

blog.hootsuite.com
Publication Year: 2018

US Online and Traditional Media Advertising Outlook, 2017-2021 - Marketing Charts

marketingcharts.com
Publication Year: 2018

Decrease in media content consumption among consumers by source in the U.S. 2017 | Statistic

statista.com
Publication Year: 2018

5 facts about the state of the news media in 2017

pewresearch.org
Publication Year: 2018
i

IAB internet advertising revenue report

iab.com
Publication Year: 2017
From Part 03

Numbers are in: Uber, Lyft v. Rental Cars & Taxis in the US in Q2

wolfstreet.com
Publication Year: 2018
Quotes
  • "Of the three ground transportation segments for business expense reimbursement – rideshare, rental cars, and taxis – the share of Uber and Lyft combined reached 72.5% share in the second quarter, according to Certify. That’s up from 0% not too long ago! In Q1 2014, when Certify started tracking rideshare reimbursements, their combined share was 8% (almost all Uber). At the same time, rental-car share of reimbursed ground transportation plunged from 55% in Q1 2014 to just 22% in Q2 2018. And the share of taxis plunged from 37% to just 5%:"
b

No, Rental Cars Aren’t About to Disappear

bloomberg.com
Publication Year: 2018
Quotes
  • "It shows big changes in business-traveler behavior (and by extension in consumer behavior in general). But rental-car companies appear to still account for a 70 percent share of ground-transportation spending by Certify users, more than twice that of Uber and Lyft combined. Which makes sense: If you’re traveling to anywhere but a city center or other densely packed neighborhood in the U.S., renting a car for a few days is still usually more convenient than trying to get by on ride hailing, transit, walking or, well, scootering."

Rideshare: Uber announces IPO, leads rideshare sales over Lyft - Second Measure

secondmeasure.com
Publication Year: 2019
Quotes
  • "Uber has filed its IPO, reaching the highly anticipated milestone weeks after rival, Lyft. While Uber dominates U.S. rideshare, Lyft is growing faster. In March, Uber accounted for 69 percent of U.S. rideshare spending, and Lyft captured 29 percent of the market, up 3 percentage points from a year ago. Uber is also expected to file its IPO this year."
u

Understanding the Recent Transit Ridership Decline in Major US Cities: Service Cuts or Emerging Modes?

usa.streetsblog.org
Publication Year: 2018
Quotes
  • "The commuter rail coefficient is positive, suggesting complementarity, but insignificant. The heavy rail and bus coefficients are negative and significant. This suggests that TNCs reduce transit ridership. The effect is greater for each year after TNCs enter a market, with the coefficient interpreted as a growth rate. After TNCs enter a market, heavy rail ridership decreases by 1.29% per year, and bus ridership decreases by 1.70% percent per year. This is reasonable to expect as TNC use grows after entering a market. The light rail coefficient is also negative, but is insignificant."
g

Trends in Taxi Use and the Advent of Ridehailing, 1995–2017: Evidence from the US National Household Travel Survey

google.com
Publication Year: 2018
Quotes
  • "From 2009–2017, the for-hire vehicle market share doubled. While for-hire vehicles still only account for 0.5% of all trips, the percent of all Americans who use ridehailing in any given month is nearly 10%. Within the for-hire vehicle market, this trend of growth has not been uniformly distributed across demographic groups or geographies; it has been greater in mid-sized and large cities, and among younger individuals and wealthier households. "

Analysts: Ride-hailing putting a dent in car rental revenue: Travel Weekly

travelweekly.com
Publication Year: 2017
Quotes
  • "The two largest publicly traded U.S. car-rental companies this month each reported drops in first-quarter revenue and widening losses, suggesting that the growing popularity of ride-hailing services, such as Lyft and Uber, is cutting into traditional car-rental demand."

Car Rentals - United States | Statista Market Forecast

statista.com
Publication Year: 2019
Quotes
  • "Revenue in the Car Rentals segment amounts to US$10,289m in 2019. Revenue is expected to show an annual growth rate (CAGR 2019-2023) of 1.9%, resulting in a market volume of US$11,101m by 2023. User penetration is 5.2% in 2019 and is expected to hit 5.1% by 2023. The average revenue per user (ARPU) currently amounts to US$597.65."

Ride Hailing - United States | Statista Market Forecast

statista.com
Publication Year: 2019
Quotes
  • "Revenue in the Ride Hailing segment amounts to US$18,405m in 2019. Revenue is expected to show an annual growth rate (CAGR 2019-2023) of 9.3%, resulting in a market volume of US$26,315m by 2023. User penetration is 16.2% in 2019 and is expected to hit 18.1% by 2023. The average revenue per user (ARPU) currently amounts to US$345.83."

Car Rental Companies Are Losing Customers to Rideshares, Report Says

fortune.com
Publication Year: 2019
Quotes
  • "In an analysis of $140 billion of travel transactions over the past two years, 63% of previous car rental customers reduced their spending on car rentals—almost a $3.2 billion loss. Moreover, 56% stopped using car rental services altogether, with most of these customers moving to rideshare services."

More Americans are using ride-hailing apps

pewresearch.org
Publication Year: 2019