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Special Report: Managing the shift of sales from stores to online is critical

Those retailers that are best able to handle the inexorable shift of shopper spending from stores to online will be the successes of the future as they grab increasing market share from their rivals. By Glynn Davis in Paris

GENERAL MERCHANDISE

Special Report: Managing the shift of sales from stores to online is critical

Those retailers that are best able to handle the inexorable shift of shopper spending from stores to online will be the successes of the future as they grab increasing market share from their rivals. By Glynn Davis in Paris

Speaking at the World Retail Congress in Paris Tony Stockil, chief executive of Javelin Group, told delegates: "The real problem is that this is a zero-sum game. Retail is not growing so those able to marshall the channel shift can gain from their competitors. There is a significant adjustment taking place...retailers have to transform or perish." 

He suggests that while store sales continue to decline - to the point that by 2020 there will be 30% fewer shops in the UK - in sharp contrast to this as much as 28% of non-food sales will be transacted online by 2017.

This trend has resulted in many UK and US traditional stores-based retailers to currently generate over 10% of their sales online and for some such as John Lewis it is as high as 25%. But not only is online attracting sales directly it is also impacting on revenues in stores as consumers take an increasingly blended shopping journey.
Javelin cited Dixons as having 82% of its transactions partly/all online and crucially 94% partly/all in-store, which is a result of the increased amount of research that is now done online regardless of the channel over which the purchase is ultimately made.

Stockil urged retailers to "think 50/50" whereby their online and store sales are equally balanced in the future. For some like John Lewis this is not a long journey but for others who have not been building a digitally connected business this could be a big challenge.

To address this he suggests the investment in technology has to be increased from the historical 1.5-2% of sales to nearer 6%, which would put it on a par with online-only businesses such as Amazon.
Mark Lewis, director of online at John Lewis, has recognised the need to adapt the business as he suggests: "The next three to five years will see the greatest disruption in a generation. Customers are adopting new technologies that will change the way we shop."

Dating back to early 2001 when John Lewis bought buy.com and built its digital business around this platform Lewis says the company has adopted an omni-channel strategy to stay ahead of consumer trends.
With two-thirds of its sales now involving more than one channel he is very much a believer in delivering a blended shopping experience to customers. Hence the company is putting kiosks into stores, introducing iPad bars in its cafes to allow customers to browse the full range, and having collection points as he reveals 50% of online orders are collected in-store.

This is resulting in a rethink of the role of the store and Lewis says there are now a variety of formats in operation including At Home department stores and smaller footprint units such as its Exeter store. "We've a blend of formats that are driven by location rather than by the different channels," he says.

The ability to action such activities within the company stem from the organisational structure of John Lewis, which has Lewis seated on the board, and a policy that ensures the key enablers of an omni-channel strategy are well represented in senior positions.

This endorsement at the top is absolutely crucial, according to Stockil, who says: "Where the CEO is championing the change makes a big difference. If the CEO is not doing this then the transformation will not happen."

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