Internet Retailer recently published the 2009 Edition of its Top 500 Guide, which provides profiles and statistics on “America’s 500 Largest Retail Web Sites”. eCommerce professionals look forward to its publication every June not only to see the relative rankings of the online retailers, and to also pick apart the shifting dynamics of the industry.
Over time, and to its credit, Internet Retailer has expanded the type of data it collects or assembles on each retailer, and is now providing online access to its databases to subscribers. They recently started profiling which payment types — or tenders — are accepted by each merchant.
This year Glenbrook decided to use the raw data from the 2009 edition (which captures all of 2008) to do some tender type analysis and see what we could learn about acceptance trends. Internet Retailer publishes data on the Top 500, but makes a big deal out of the significance of the Top 100 online retailers.
The 2009 report says that the Top 100 generated $98.6 billion in merchandise sales, which is 55.4% of all eRetail sales in the US and up 12.4% year-over-year from 2007. Our analysis shows that this group represented 52.8% of all eRetail sales in 2007, so in spite of the long tail, online purchase volume continues to shift towards major merchants. To simplify our tender type analysis, we only looked at the Top 100.
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For those of you that have been following the evolution of the eCommerce market, the results shouldn’t be too surprising. Here’s how we interpret the numbers.
Visa and MasterCard are the gold standard in online tender type acceptance, so there is no surprise that they are accepted by every merchant in the Top 100. American Express and Discover have both done a good job with acceptance and are now on par with Visa and MasterCard acceptance in the top tier of online retail. It’s amazing, actually, that there are still one or two retailers in the Top 100 that don’t accept American Express and Discover.
In what may be a surprise to some, private label credit cards continue to be a force in this segment of the market with 56 of the Top 100 merchants currently managing their own private programs. These merchants often use private label credit as a way to offset bank card interchange, and as a platform to extend their own promotional financing. Internet Retailer data says that 40 retailers in the Top 100 offer deferred payments. They aren’t clear about the definition they are using, but our guess is that they mean 40 of those 56 merchants also offer promotional financing with their private label credit cards.
Some people may be surprised that 48 of the Top 100 eRetailers accept stored value cards (aka gift cards) as payment. But you have to remember that many of the most successful online merchants are also successful offline merchants, and have the ability to distribute gift cards through their own retail outlets, as well as through the ubiquitous gift card malls.
The data also shows that 35 of the Top 100 retailers accept PayPal. The raw data broke down PayPal acceptance by product, which was intriguing to us. The report indicated that 17 of these 35 retailers were using PayPal Express Checkout. We can only speculate that the other 18 were using PayPal Website Payment Standard. This was somewhat surprising since Express Checkout is positioned as the PayPal product for top tier merchants.
Bill Me Later acceptance, by 31 of the Top 100, is roughly the same as PayPal acceptance. Given that PayPal now owns Bill Me Later, the company is well positioned as the de facto alternative payment provider for online merchants. PayPal makes a big deal out of how complementary PayPal and Bill Me Later are, so we looked more closely at acceptance data. 21 of the merchants reported accepting both PayPal and Bill Me Later, which indicates to us about a two-thirds overlap with the Top 100 eRetailers. It also speaks to the relationship PayPal now enjoys with large merchants, as about half accept either PayPal or Bill Me Later if not both.
Looking at the acceptance of all tenders across the Top 100, 87% of the Top 100 accept a form of payment other than the main four payment card tenders. 72% took at least five types of tenders — the four main tenders plus one alternative. On the far end of tender types diversity, 11% of the Top 100 took at least 8 different types of tenders.
A couple of final thoughts. It’s always important to understand the context of any analysis. The Internet Retailer Top 500 report is focused on the eRetail segment of the eCommerce market. It doesn’t cover other eCommerce segments such as travel, digital content, online services, etc. A complete market analysis of eCommerce merchants would have shown a different mix of tender types. UATP, for example, would have made the list due to its prevalence in the travel industry.
The Internet Retailer report is also specific to online retailers based in the United States. Our analysis at Glenbrook indicates that about 60% of the global eCommerce market is now outside the United States — and tender type acceptance (and acceptance strategies) vary greatly country-to-country. Helping online merchants sort out their global acceptance strategy is one of our main practice areas at Glenbrook, so we can say first hand that the acceptance trends look very different in many markets. But it’s good to have the US-specific acceptance and we commend Internet Retailer for gathering the data and making it available to the industry.