If there is one company that exemplifies the ongoing trend from brick-and-mortar retailers to online sales, that company is Amazon.com, Inc. (NASDAQ:AMZN). Its sheer domination of the e-commerce space has been nothing short of extraordinary, and what began as an online bookstore has become one of the largest retailers worldwide.
2017 was another banner year for the company, though some investors may not be aware of the sheer magnitude of the retailer's supremacy. Amazon grabbed an estimated 44% of all e-commerce sales in the U.S. for 2017, which represents about 4% of all retail sales in the country, according to e-commerce analytics provider One Click Retail.
From the biggest sellers...
Amazon's top-selling product categories should come as no surprise, as many are perennial favorites for shoppers. Consumer electronics was the company's top-selling segment, with more than $8.5 billion in sales, which grew 4% year over year. This includes products such as computer components, laptops, televisions, and wireless accessories. Consumer electronics has long been a staple for Amazon shoppers, as the e-commerce site gave rise to the practice of "showrooming," where consumers would test physical products at brick-and-mortar retailers before buying them online.
The home and kitchen line was another popular product category for Amazon, with an estimated $5.5 billion in sales, which increased an impressive 20% over the previous year. Other multibillion-dollar categories include publishing at more than $5 billion, up 3% year over year, and sports and outdoors equipment with $4 billion in sales, up 11% over 2016.
...to the fastest growers
The fastest-growing product categories of Amazon's sales for 2017 show that the company has much more room to grow in the years ahead. The company's top growth product groups cut across a broad swath of its selections, with the fastest grower being the luxury beauty category, which increased 47% over the prior year to an estimated $400 million.
Pantry items also saw significant sales increases, growing 38% year over year to $500 million, while grocery items and furniture each increased 33% over the prior year to approximately $1.5 billion each.
Other surprising statistics
The report yielded other important information about how Amazon will continue to increase its sales.
Over "50% of product searches begin on Amazon," according to the report, causing many advertisers to invest more heavily in Amazon's advertising, resulting in a virtuous cycle.
Sales of consumable items, which includes grocery, pet products, health and personal care items, and beauty products, were up 35% year over year during the first half of 2017 -- even before Amazon's acquisition of Whole Foods.
Another startling figure was the estimated $450 million in sales of private-label products by the e-commerce juggernaut. Brands like AmazonBasics, Amazon Elements, Wickedly Prime, Happy Belly and a host of newer brands mark the company's ambitions in the space. The addition of Whole Foods earlier this year also added its 365 Everyday Value to the Amazon stable of brands.
Several growth drivers
In its annual review of Amazon, One Click Retail CEO Spencer Millerberg stated that millennials are a core demographic of Amazon, which bodes well for its future:
Every major trend we see across 2017 can be explained by the fact that more of Amazon's core demographic (millennials) are growing up: they're increasingly owning homes, raising children, and buying a TON of stuff to go with it. The bulk of the estimated $5.5B in Home & Kitchen sales comes from young people -- those who shop from Amazon the most -- investing in their homes and in their families.
Amazon will also benefit from the increasing popularity of its Prime member program. During its just-completed holiday season, the company reported that "in one week alone, more than four million people started Prime free trials or began paid memberships." Those Prime members tend to buy more, spending $1,300 annually on the site, compared to $700 for non-member customers, according to research by Consumer Intelligence Research Partners (CIRP).
Amazon's Echo family of smart speakers were the hottest product category on the e-commerce site over the holidays, and the devices have also been driving additional sales. According to CIRP, Echo owners use voice-activated shopping to spend approximately $1,700 annually -- exceeding the average of even Prime members, though there is undoubtedly overlap.
The bottom line
There are lots of reasons to like Amazon going forward. With largely untapped product categories, increases in private-label sales, voice-activated shopping, and millennials coming into their own, the future looks bright for the online retailer.