The move to multichannel
As online growth grows into mcommerce and potentially scommerce retailers need to ensure they evolve with the market over the coming decade. By Jon Copestake, Economist Intelligence Unit.
Ten years is a long time in retail, especially given the technology changes that are continuing to evolve consumer habits. A decade ago Amazon had only just made the shift into profitability, there was no such thing as Facebook and mobile phones were used for text messages and phone calls. As a result retailers were very much focussed on being point of sales opportunities existed. High street or mall formats were growing to tap into existing footfall and big-box, out of town, locations were popping up to attract footfall of their own
The world is a much more connected place now and consumer point of sale opportunities exist anywhere where there is a phone signal. Social networks have gone beyond being a means of contacting friends to become avenues of brand engagement. High streets and malls on both side of the Atlantic are struggling to come to terms with dwindling numbers of shoppers, while retailers are shifting away from big box into convenience and online channels. The Economist Intelligence Unit's "Retail 2022" report explores ways that retail channels and markets will evolve in the coming decade.
Ecommerce has stepped into the mainstreamIn ten years revenues for the global internet retail giant Amazon have risen twelvefold from less than US$4bn in to around US$50bn today. Total online retail accounts for around 10% of the US market. The proportion is even higher in the UK, with web purchases expected to account for over 13% of all retail sales in 2012 (according to the Centre for Retail Research). Although emerging markets have further to go, the rate of growth is even more rapid. Last year China reported that online B2C transactions increased by 53.7% to reach US$123.2bn.
Online is increasingly becoming one of the first ports of call for shoppers and, in the next ten years leading online markets such as the UK could see e-commerce account for one-third or more of overall sales. Online shopping has traditionally been limited to products like books, downloads and consumer electronics. However, views that "try before you buy" categories such as clothing or groceries would not catch on are being proven wrong with the success of firms like ASOS and the increasing focus on online sales for mainstream grocery retailers.
Showrooming will be a gamechangerMuch of this growth has been built on the convenience of desktop or laptop purchases from fixed points in the home and office, adding only a single additional dimension for consumers. But the emergence of smartphones and shopping applications have revolutionised point-of-sale decisions. Shoppers can search for items by quick response (QR) codes or photographs they take, or even make real-time purchases of products they see in their favourite television programmes. Last year Forrester, a US-based market research company, forecast an elevenfold rise in mobile retail transactions in Europe by 2017. With tablets, ereaders and smartphones all becoming a focal point for retail-driven software apps, this estimate looks conservative. Not only does mcommerce offer an almost infinite dimension to point of sale decisions, but trends like "showrooming" (where consumers try items instore but then buy them more cheaply on smartphones) are bridging the gap between online and traditional shopping methods.
Will scommerce add a new dimensionPoint-of-sale purchase decisions are not just evolving in the physical world but on the web as well. Social networks have provided a new springboard for brand interaction, viral marketing and social storefronts to provide an alternative channel for retailers to sell through. Although this channel has been limited in scope, with some storefronts closing after disappointing sales, the emergence of an online pinboard community, Pinterest, has accelerated retail opportunities significantly by driving traffic for pinned items and products. This has not been lost on e commerce giant, Rakuten, which has invested heavily in Pinterest with a view to using the network as a storefront for popular items.
What does this mean for traditional channels?The high street may no longer drive sales in the same way, but it will continue to act as a channel for consumers to see, touch and try out goods—even if they make purchases using other means. A recent survey by Capgemini across 16 key markets saw that over half of all respondents felt that, by 2020, shops would operate as little more than showrooms. Retailers need to take an "if you can't beat them, join them" view that uses store presence to enhance the service offering of online channels.
The fast-growing "click-n-collect" hybrid channel, where consumers buy online and then collect from a pre-agreed store is one example of this. Stores can also offer returns and customer service for web-bought products. While retailers accept the burgeoning influence of online, there is little doubt that a multi-channel approach is the best means of exploiting a diverse retail market. As a result pureplay giants like Amazon and eBay are taking steps into bricks-and-mortar operations through lockets, pick up points and "pop up" stores. In ten years we may see an even more tangible presence from these retailers on the high street and in shopping centres.
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