Buying Food Over Fun: How the Global Market is Spending Money Online

Buying Food Over Fun: How the Global Market is Spending Money Online

Buying Food Over Fun: How the Global Market is Spending Money Online

Sam Murrant

Samuel Murrant

Sam is a senior analyst on the consumer payments team at GlobalData. His areas of expertise include online payments and m-commerce, payment card loyalty, prepaid cards and the United States payments market.

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Since the beginning of online commerce, luxury items have dominated the market, specifically those related to travel. According to a study by Verdict Financial, purchases in this category accounted for 14 percent, the largest share of online commerce by value of all merchant categories. This means that globally, consumers spent $276 billion on flight and hotel bookings online.

This dollar amount may be staggering, but it doesn't tell the full story. While this category has seen a compound annual growth rate of 1.5 percent from 2012 to 2015, flight and hotel booking sales have not kept pace with growth seen in other sectors. The overall shape of the market has moved to become more diverse in terms of consumer spending over the past four years.

So where is the money going?

Rather than going online to book a vacation, consumers are increasingly spending on smaller, more frequent purchases. Online channels have become a place to buy essentials and impulse purchases that were previously made in brick-and-mortar locations. And while you might think that the focus would be on more sustainable items, such as clothing or beauty items, consumers are focusing on more immediate needs. The top merchant category by number of transactions in 2015 was actually food and drink, accounting for 14 percent of the total number of online transactions and generating $15 billion in online sales.

This spending increase reveals greater depth in the general spending patterns of online consumers. Unsurprisingly, the high-ticket categories (such as flight and hotel bookings and electrical goods) account for higher shares of online commerce by value than by volume, due to their high cost and the infrequent nature of purchases of goods in these categories.

Food and drink purchases, however, show the opposite trend. Consumers have not only begun to see the importance of essentials to online commerce, but have started to see the time-saving capabilities. For example, the practice of ordering a full week of groceries online in order to save time, compared with shopping for groceries in-store, has become increasingly common and these numbers give further credence to those who see such endeavors as the future.

However, it is not only weekly Amazon Pantry orders accounting for this category’s large share of the online commerce market. It is likely that purchases in this category are increasingly driven by orders of food on merchant apps for pick-up or delivery, either directly from merchants or from services, such as the popular UK services Just Eat and HungryHouse or the United States’ Seamless and Grubhub.

Convenience versus consideration

With such a shift in online spending categories, it is also important to consider how the purchases themselves are being placed, particularly with such daily necessities. Consumer buying trends online are often reflective of channel preferences to an extent.

Purchases of high-ticket items tend to be purposeful and researched, giving a clear favor to the use of desktops or laptops over tablets or smartphones. However, with the rise of dedicated merchant apps, this channel preference is no longer as pronounced as it was even three years ago.

The gradual erosion of the dominance of luxury categories correlates with the rise in prominence of mobile commerce. Some food and drink purchases can contribute somewhat toward the dominance of e-commerce over m-commerce, since weekly online food shops lend themselves better to a larger screen. However, merchant apps are reversing this trend to an extent, particularly when considering the ease of ordering a quick dinner on a smartphone rather than a laptop.

A market maturing

Overall, the global trend in consumer purchasing habits is highly varied, highlighting the mature nature of the online commerce market and the wide proliferation of online stores and apps among all different categories of merchants. There are some key sectors that account for larger shares than others — and merchants operating within these should be prioritized by payment providers as partners. But all sectors are growing strongly and should be considered by providers aiming to maximize their profits from the online market.

The statements and opinions of the writer do not necessarily reflect those of TSYS.

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Samuel Murrant

Sam is a senior analyst on the consumer payments team at GlobalData. His areas of expertise include online payments and m-commerce, payment card loyalty, prepaid cards and the United States payments market. His main interests in payments lie in evaluating new payment products from a consumer perspective.

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