Big box retailers got hammered in the market on Wednesday, after Macy’s reported dismal earnings.
That followed news of Amazon’s stock reaching an all-time high, underscoring the more secular shift we’ve been seeing in online shopping.
But the bullcase for Amazon and the broader e-commerce market shouldn’t stop there.
As this chart by the financial research firm Pacific Crest shows, e-commerce is still only a tiny part of the overall retail industry, representing a mere 7.2% penetration rate. That means on average only 7 out of 100 retail customers are buying online.
In other words, there’s a massive opportunity for online retailers, most notably Amazon, which has driven more than half of all US e-commerce growth last year, to win more share and generate more revenue.
The scarier part is that Amazon only gets about 25% of its total retail revenue from books and media, the most saturated e-commerce category. The rest of its sales comes from things like apparel, electronics, and home furnishings, categories that still remain vastly underserved, according to Pacific Crest’s chart. Plus, Amazon’s non-media sales is growing at a 30% clip year-over-year.
Perhaps, that explains why Cowen & Co. predicts Amazon will replace Macy’s as the largest retailer in the US by next year.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.