The 5 Most Lucrative Ecommerce-Startup Categories for 2021
Online shopping, already fast-accelerating prior to Covid-19, is now set to overwhelm in-store purchases in just a few years, but in which sectors should new-business entrepreneurs concentrate?
In 2017, Nasdaq predicted that ecommerce would account for 95% of purchases by 2040. Not even five years later, that already remarkable market-transition prediction has been further accelerated by the Covid-19 pandemic; despite health and safety protocols meant to bring people back out of their homes and into stores, most are still inclined to shop online.
Shopping trends vary by country, but ecommerce gives you the option of a global marketplace. This will increase opportunities for business success, especially if you find a niche among top-performing categories. A recent analysis by Oberlo ranked shopping categories in terms of worldwide revenue. The top five:
The biggest mover in ecommerce right now is fashion, with consumers expected to spend nearly $760 billion in purchases this year. In fact, more than 25% of all dollars consumers spend online is spent on fashion, and those numbers are expected to increase. Leading European online fashion retailer, Zalando, saw its gross merchandise value grow by 34% in the second quarter of 2020, and the market for athletic leisurewear is anticipated to enjoy a compound annual growth rate of 6.7% through 2026.
The closure of retail stores during the pandemic didn't just move purchases online: People are spending more, too. A recent Experian survey found that 11% of people reported spending more money on clothing than before the pandemic, a 5% net increase from the previous year. A critical and fascinating additional consideration is that, increasingly, fashion's attracting-customers battle is less about having a name and more about a memorable customer experience, so even in this highly competitive sector, an online startup has a chance at success.
2. Toys, hobby and DIY
Unemployment surges, home learning, and greater isolation pushed many people to toys or hobbies to fill the time, and more than $590.70 billion of online spending in 2021 is expected in that sector. In the second quarter of 2020, North American arts and crafts leader, Michaels, saw a net sales increase of 11.1%, with a 353% increase in ecommerce sales. Across the pond, UK-based British Hobbycraft reported a 200% boom in online sales since the start of the pandemic. Even as lockdown conditions ease, and as more people learn the value of diversifying their abilities and activities, these trends are unlikely to wane.
3. Electronics and media
This sector is estimating $542.2 billion in sales this year. In May, first-quarter consumer spending on home entertainment was up 10%, with the biggest gains coming from subscription streaming. Notably, this growth doesn't include premium video-on-demand, which Variety described as "an economic and logistical necessity" since movie theater closures.
4. Food and personal care
These up-close-and-personal sales are expected to reach $468.5 billion this year. Many of its products are staple items that need to be replaced on a regular basis, and even before the pandemic, people were demonstrating an interest in paying for quality beauty products. A 2017 CNBC analysis of growth among Amazon product categories showed that luxury beauty items performed best, at 47% year-over-year.
Another consequence of spending more time at home is that people are focusing on cooking. That same CNBC analysis ranked pantry (38%) and grocery (33%) among top growth performers. In a March 2021 consumer survey, 43% of respondents indicated they planned to cook more at home, and 42% of respondents in an Experian survey that same month said they were spending more money on groceries than before the pandemic. Whether it's food or personal care, consumables remain a sustainable option for lucrative sales.
5. Furniture and appliances
Projections rank these collectively last among our top five, with $362.90 billion in estimated sales. CNBC 2017 figures were already ranking furniture (33%) among Amazon's top product growth performers before the pandemic. Now, with people investing in home offices, that market is expected to register a compound annual growth rate of 5% between 2021 and 2026.
Spending more time at home means investing more in its spaces. Mintel reports that appliances experienced a 5.5% gain in 2020 as a result of the pandemic, and further that, when it came to spending, people were prioritizing their homes and willing to pay for more convenience in their lives, so an ecommerce business in this category can be a lucrative option.
Online shopping will continue to evolve as it becomes our primary consumption medium. Even online retailing of cars and other vehicles is among the categories of interest, though it may be some time before it breaks into the top-five sellers. These markets are definitely the way of the future, so tap into them now for a better chance at success.
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