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ADI -- Digital Divide 2019

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With eCommerce growth expected to slow, down 13% from 14.3% in 2018 to 12.4% this year we wanted to determine if there were regional/demographic/behavioral differences.

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ADI -- Digital Divide 2019

  1. 1. City Profiles: The Digital Divide
  2. 2. 2 Visit our website: adobe.ly/AdobeInsights Sign up for email alerts: http://www.cmo.com/adiregister.html Follow us: @adobeinsights Profiling How American Cities Shop Online Based on analysis of aggregate and anonymous data via: • Adobe Analytics measures transactions at 80 of the top 100** retailers on the web in the U.S. • Product and pricing insights based on analysis of sales of more than 55 million unique products • American Community Survey used to profile US Cities; simplecmaps.com used to get location and population figures • 4,.500+ cities used in analysis Adobe Advertising Cloud ** Source: Adobe Analysis of Internet Retailer 2018 Adobe Experience Cloud Adobe Analytics Cloud CITY PROFILES | 2019 Methodology
  3. 3. CITY PROFILES | 2019 Methodology Definitions • Research Objective: • With ecommerce growth expected to slow, down 13% from 14.3% in 2018 to 12.4% this year we wanted to determine if there were regional/demographic/behavioral differences. • Individual City Profiles: • Big vs. Small: based on population of over/under 100,000 people • High Income vs. Med/Low Income: based on per capita income above or below $50,000 • Rural vs. Urban: determined by county area defined as rural; 40% used as the line of demarcation • Financially Stressed vs. OK: top ranked on composite of unemployment, no health insurance and below poverty line • Diverse vs. Homogeneous: top ranked on composite of race (non-white), other language than English, and not native to state of residence • High Revenue Growth vs. Low Growth: cities above/below 20% YoY growth in ecommerce • Smartphone High Order Value vs. Smartphone Share of Revenue: top third on each metric, but not in both 3
  4. 4. CITY PROFILES | 2019 4 Key Findings • Large cities are driving stronger e-commerce growth than smaller cities • Affluent/High Income Cities are fueling the online economy, but they don’t convert easily are not able to stop overall e-commerce growth from slowing • Diverse Cities outperform homogenous cities, across practically every e-commerce growth metric • Rural areas' infrastructure shortcomings are limiting ecommerce adoption and their contribution to the online economy • Desktops orders continue to boast higher AOVs, which should be considered as more users migrate to smartphones, and lower income households make smartphones their sole purchasing device
  5. 5. 16.4% 12.6% 8.5% 8.1% 0.0% 10.0% 20.0% Revenue Growth Visit Growth Topline Growth Population over 100k Population Under 100k CITY PROFILES: Big vs. Small | 2019 Larger cities driving online retail revenue growth. • Cities over 100k people contribute to ecommerce commensurate with their population • Visit Index: 106 and Revenue Index: 98 • Larger cities exhibiting stronger Year over Year growth, with all drivers up year over year • Smaller cities had an edge on conversion, RPV and AOV, larger cites had the edge on unit price • With differential ecommerce growth there maybe a digital divide in the not too distant future 1.9x 1.6x 5 Method: Indices are defined as “share of {metric}” divided by “share of population”. YoY Change in Key Drivers Population over 100k Population Under 100k RPV 1.6% 4.9% Conversion 1.3% 2.8% AOV -0.3% 1.9% Unit Price 8.9% 7.0%
  6. 6. CITY PROFILES: Big vs. Small | 2019 Large market consumers look for different things than small market shoppers. • Computers, Phones & Electronics along with Baby & Toddler shows largest positive share swing between segments • Memberships* and Apparel & Accessories account for smaller share of visits 6 Method: Indices are defined as “share of {category} among target segment” divided by “share of {category} among rest of cities” Visits used instead of revenue due to the large variance in unit pricing across categories. * Memberships refer to programs offered by retailer to gain access to products and or services. More likely to buy Less likely to buy Similar shares. (1.00) - 1.00 Computers, Phones & Electronics Baby & Toddler Hobbies, Toys & Sporting Goods Gifts & Flowers Personal Care & Medical Equip Alcohol & Tobacco Pet Products Auto Parts & DIY Toys & Sporting Goods Home & Housekeeping Media & Entertainment Grocery Office & Professional Apparel & Accessories Memberships Difference in Shopping by Category Small Market. Large Market
  7. 7. CITY PROFILES: Big vs. Small | 2019 Conversion, not order value, separates big markets from small. • In large cities, smartphones steal share from both desktops and tablets. • Smartphones account for $1 in $3 in large cities • Are consumers taking advantage of more points of distribution? 7 61% 32% 7% 66% 25% 9% 0% 10% 20% 30% 40% 50% 60% 70% Share of Revenue by Device Population over 100k Population Under 100k • Higher conversion in smaller cities, 2.4% vs. 2.0%, raises the value (RPV) of those visitors • Consumers in large cities place slightly bigger orders (AOV) from higher priced items but conversion dampens revenue per visit Population over 100k Population Under 100k RPV $3.14 $3.64 Conversion 2.0% 2.4% AOV $160 $154 Unit Price $39.77 $37.40 Basket Size 4.0 4.1
  8. 8. HOLIDAY PREDICTIONS | TALE OF TWO HOLIDAYS | 2019 Retailers See Traffic From Across the US Markets profiled split into 3 segments and account for 180M people. • 1,028 high income markets (median HHI $100K) tend to cluster around major metropolitan areas (7% of county is rural) • 965 low income markets (median HHI $33k) are spread across the country, often in outlying areas (40% of county is rural) High Income Market examples: • Palm Beach, FL • Atherton, CA • Scottsdale, AZ • Glencoe, IL • Bronxville, NY Low Income markets represented by: • Coatesville, PA • San Juan, TX • Gatesville, TX • Clinton, SC • Gainesville, GA
  9. 9. HOLIDAY PREDICTIONS | TALE OF TWO HOLIDAYS | 2019 The Value of High-Income Markets is Traffic Market commentary • Relative to their share of the population, high income cities produce more retail traffic than low income. • Improving visit performance vs. generating more visits represents a viable strategic distinction +40% Visits High vs. Low Income Markets+40%
  10. 10. HOLIDAY PREDICTIONS | TALE OF TWO HOLIDAYS | 2019 Growth This Holiday Likely to Come from High Income Markets Online retail shopping expanding among households with median HHI of $100k while it is contracting in markets where households have median HHI of $33k in income. Concentration of sales appears to be moving to Higher Income Markets. High Income markets showed slight improvement in Revenue per Visit (RPV) of +2% vs. no change year over year.
  11. 11. HOLIDAY PREDICTIONS | TALE OF TWO HOLIDAYS | 2019 Everyone, regardless of income, takes advantage of Holiday Weekend deals. The value of a visit increased 74% during the five-day weekend regardless of where consumers’ income. The gain comes from better conversion since there is only a small increase in average order value (AOV) Key Metric Segment 6 Months ending Aug 2018 Holiday Weekend 2018 Holiday Lift RPV Low Income $3.81 $6.64 74% High Income $3.89 $6.73 73% AOV Low Income $148 $163 10% High Income $155 $157 1% Conversion Low Income 2.6% 4.1% 59% High Income 2.5% 4.3% 71% There is a switch in AOV – prior to the weekend higher income markets placed larger orders, that flipped during the five-day weekend before settling back down.
  12. 12. HOLIDAY PREDICTIONS | TALE OF TWO HOLIDAYS | 2019 Income Level Shifts the Types of Discretionary Products Consumers Buy Online. 75%+ of US e-commerce spend during the holidays is on personal items as opposed to more generic items for the household. • In low income markets spend shifts toward “something to do” with Media & Entertainment capturing more share of wallet than in high income markets.. • High Income cities shift spending toward other types of discretionary items., including the large Apparel & Accessories category. High Income markets spend more on these items.
  13. 13. 4.1% 6.0% 13.0% 13.4% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Revenue Growth Visit Growth Topline Growth City In Rural Counties City In Urban Counties CITY PROFILES: Rural vs. Urban | 2019 Rural area ecommerce growth trails urban areas. • Consumers in rural areas shop less online than those in urban areas • Visit Index: 72 and Revenue Index: 79 • Cities in rural counties exhibiting weak Year over Year growth • Rural markets trending positive on all four drivers; driving traffic may be the objective 3.1x 2.2x 13 Method: Indices are defined as “share of {metric}” divided by “share of population”. YoY Change in Key Drivers City In Rural Counties City In Urban Counties RPV 7.5% 3.8% Conversion 5.1% 2.0% AOV 2.2% 1.7% Unit Price 4.7% 7.9%
  14. 14. CITY PROFILES: Rural vs. Urban | 2019 Strong rural conversion suggests intent when they do shop. • In towns in rural areas, smartphones less prevalent than in more urban areas. • Smartphones account for $1 in $4 in rural areas 14 • Higher conversion in rural cities, 2.7% vs. 2.1%, raises the value (RPV) of those visitors • Despite consumers in rural cities placing smaller orders (AOV) consisting of less expensive items. • More intent, less “tire kicking” City In Rural Counties City In Urban Counties RPV $3.71 $3.39 Conversion 2.7% 2.1% AOV $139 $158 Unit Price $33.02 $38.86 Basket Size 4.2 4.1 65% 25% 10% 63% 29% 8% 0% 10% 20% 30% 40% 50% 60% 70% Desktop Smartphone Tablet Share of Revenue by Device City In Rural Counties City In Urban Counties
  15. 15. CITY PROFILES: Rural vs. Urban | 2019 Cities in rural counties found everywhere east of the Mississippi • Description: Small towns that are economically below national averages • Less educated in general • Shift toward from manufacturing, transportation and agriculture occupations • Location: sparser in the West, some may be too small to be included in ACS. • Nearly absent in California – agricultural counties still have very large cities in them 15 Data source: American Community Survey, Census Bureau and Zillow National figures: $59k for Median HH Income and $227k for home value. City In Rural Counties City In Urban Counties No. of Cities in Segment 1,073 3,452 Avg Population 10,890 49,298 Median HH Income $42,789 $65,950 House Value $127,183 $260,403 Rural Percent 56.7 12.4 Mfr/Trans/Wholesale/AG Industry 23.8 19.9 Prof /Tech Industry 12.7 19.5 Enrolled In Bach+ Program 24.6 26.6 Have Bach+ Degree 21.1 32.1
  16. 16. 15.1% 21.7% 9.1% 7.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Revenue Growth Visit Growth Topline Growth Diverse Cities Homogeneous Cities CITY PROFILES: Diverse vs. Homogeneous | 2019 Cities defined by diversity outperform more uniform markets • Diverse cities contribute more to retailer visits and revenue than their population alone would suggest • Visit Index: 114 and Revenue Index: 107 • Diverse cities exhibited stronger Year over Year growth, particularly in terms of visits., • They led more homogeneous cities on all but conversion, but only lagged by a small amount. 1.7x 2.8x 16 Method: Indices are defined as “share of {metric}” divided by “share of population”. YoY Change in Key Drivers Diverse Cities Homogeneous Cities RPV 5.5% 4.4% Conversion 2.6% 2.7% AOV 2.2% 1.6% Unit Price 8.4% 6.7%
  17. 17. CITY PROFILES: Diverse vs. Homogeneous | 2019 Conversion separates Diverse Cities from Homogenous Cities. • In diverse cities, smartphones garner a higher share stealing from both desktops and tablets. • Smartphones account for $1 in $3 in large cities 17 61% 32% 7% 66% 25% 9% 0% 10% 20% 30% 40% 50% 60% 70% Share of Revenue by Device Population over 100k Population Under 100k • Lower conversion in diverse cities, 1.9% vs. 2.6%, lessens the value (RPV) of those visitors • Consumers in diverse cities placing bigger orders (AOV) consisting of higher priced items illustrating the standard relationship. Diverse Cities Homogeneous Cities RPV $3.19 $3.76 Conversion 1.9% 2.6% AOV $166 $ 147 Unit Price $40.43 $36.13 Basket Size 4.1 4.1
  18. 18. CITY PROFILES: Higher vs. Lower Revenue Growth | 2019 Revenue growth comes from smaller markets • Description: While slightly smaller than low growth cities, all other demos are remarkably similar • Demographics don’t cause growth, but they can help explain it. • Easier to grow a small number than a big one. • Location: fairly well distributed throughout the country 18 Data source: American Community Survey High Revenue Growth Low Revenue Growth No. of Cities in Segment 963 3,562 Avg Population 26,146 43,987 Median HH Income $61,510 $ 60,174 House Value $244,244 $224,641 Rural Percent 23.1 22.8 Mfr/Trans/Wholesale/AG Industry 21.8 20.6 Prof /Tech Industry 17.6 18.0 Enrolled In Bach+ Program 24.4 26.6 Have Bach+ Degree 28.0 29.9
  19. 19. 13.5% 10.5%11.2% 19.3% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Revenue Growth Visit Growth Topline Growth High on Smartphone AOV High on Smartphone Share of Rev CITY PROFILES: Smartphone AOV vs. Share of Revenue | 2019 Judging smartphone shopping depends on how you measure it. • Smartphones can be viewed in two ways: • Consumers who place large orders on their phones • They have stronger revenue than visit growth • Consumers who use smartphones for a large portion of their spend • They have stronger visit growth than revenue growth • Both groups exhibit strong YoY metrics – much higher than overall totals 1.2x .5x 19 Method: Indices are defined as “share of {metric}” divided by “share of population” These are non-overlapping groups, some cities could be high on both metrics.. YoY Change in Key Drivers High on Smartphone AOV High on Smartphone Share of Rev RPV 17.6% 14.7% Conversion 13.7% 25.3% AOV 16.0% 21.1% Unit Price 12.5% 20.4%
  20. 20. (1.00) - 1.00 2.00 Toys & Sporting Goods Personal Care & Medical Equip Alcohol & Tobacco Memberships Pet Products Gifts & Flowers Baby & Toddler Office & Professional Auto Parts & DIY Grocery Home & Housekeeping Computers, Phones & Electronics Hobbies, Toys & Sporting Goods Media & Entertainment Apparel & Accessories Difference in Shopping by Category CITY PROFILES: Smartphone AOV vs. Share of Revenue | 2019 Consumers adopting these behaviors focus on different categories. • Consumers who use smartphones for a large proportion of their shopping spread their shopping around • Toys & Sporting Goods, Personal Care & Medial Equip, Alcohol & Tobacco command a larger share of visits than markets with high AOV. • Consumers with highest value for smartphone orders • Apparel & Accessories and Media & Entertainment capture higher share of eyeballs than their counterparts. 20 Method: Indices are defined as “share of {category} among target segment” divided by “share of {category} among rest of cities” Visits used instead of revenue due to the large variance in unit pricing across categories. . High Share more likely to visit High AOV more likely to visit Similar shares. AOV Share of Revenue
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