ARE CLICKS CRUSHING BRICKS? Ecommerce and the digital influence on bricks-and-mortar retail
www.shoppertrak.com
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In some senses he was right – ecommerce is rapidly growing its share of sales channel, and is forecast to account for 8.8% of total retail sales by 2018.
However, bricks-and-mortar still accounts for over 90% of all sales, and that won’t change dramatically.
The challenge for retail businesses will be adapting to the increasing influence of digital activity on physical shopping, and the way it changes consumer behaviour.
As online and offline retail merges, there are opportunities to be gained. Leveraging these opportunities will depend on retailers and shopping centres understanding – and reacting to - the relationship between ecommerce and bricks-and-mortar in their key markets.
Rumours of the store’s death are greatly exaggeratedTraditional retail stores will die off, predicted Marc Andreesen - founder of computer services company Netscape, in 2013.
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8.8%Forecasted online sales to account for 8.8% of
retail sales by 2018
90%bricks and mortar still accounts for over 90%
of all sales
2013
2014
2015
2016
2017
2018
0 5 10 1515 20 25 30
Global Sales Forecast
Bricks-and-mortar ($Trillions)
Retail Ecommerce Sales ($Trillions)
Source: eMarketer
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The mobile catalystToday’s retail landscape is a complex network, in which one consumer will make multiple interactions across different channels.
In response to this, internet pure-plays are experimenting with physical presences – Amazon launched its first store in November 2015 – at the same time as bricks-and-mortar businesses are introducing new digital capabilities.
One major catalyst blending retail channels is the rise of mobile technology, and its impact on shopper activity.
Consumers are not only using their mobile to buy directly and to search for information in the store environment, they’re interacting through an increasingly influential channel: social media.
The piloting of ‘buy button’ functions on social networks has taken omnichannel one step further, and is therefore now beginning to negate the actual need to visit retailers’ websites for online purchasing.
And as today’s technology-driven teenagers become tomorrow’s young professionals, the retail industry will need to incorporate social channels into their strategy in order to keep close contact with customer desires.
But not every market is embracing all channels at the same rate, and therefore it is necessary to understand each region’s unique channel dynamics.
4
5
2012
2014
20152017
UK China Germany US Japan France Australia Spain Italy India
2016
2013
2013
2014
2015
2018
Canada
USA
Finland
Japan
Norway
UK
South KoreaItaly
Sweden
Germany
NetherlandsFrance
China
Australia
Spain
50%Smartphone penetration
among total global population
Ecommerce sales as a percent of total retail sales
Year by Country and Year
18%16%14%12%10%8%6%4%2%0%
2018
Source: eMarketer
Tablet £(bn) Smartphone £(bn) Other £(bn)
Ecommerce £(bn) Mcommerce £(bn) Ecommerce as a % Retail Sales
Mcommerce as % of Retail Ecommerce Sales UK Retail Footfall
UK
Ecommerce is predicted to grow at an average rate of 10% a year for the next 4 years, accounting for 20% of all retail sales by 2019.
With these figures in mind, it’s not surprising that footfall is being impacted, and we predict that retail traffic will decline at a rate of -0.2% per year.
What’s interesting to note is that mcommerce’s share of online shopping in the UK will peak in 2016, when 1 in 3 purchases will come from a mobile device.
Of all the global regions, the UK has been one of the biggest adopters of online shopping.
UK spending stats
0
10
20
30
40
50
60
70
80
90
100
2014 2015 2016 2017 2018 2019 -5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
20%Predicted online sales
to account for
1 in 3purchases will come
from a mobile devicePredicted that retail
traffic will decline at a rate of -0.2% per year.
-0.2% 64% of mcommerce transactions are made on a tablet vs 36% via smartphone
64%
Source :eMarketer, Sep 2015http://www.internetlivestats.com/internet-users-by-country/ https://us.searchlaboratory.com/2015/08/global-opportunities-for-online-retailers-2015/6
of all retail sales by 2019
France
As a result, online spending is predicted to peak at 6.2% of all retail sales by 2018; lower than many other countries with similar internet access levels.
Many of France’s retail businesses may be less reluctant to invest in a multi-channel strategy given these figures.
However, digital technologies may be needed to drive physical footfall, as we forecast that bricks-and-mortar traffic will decline at around -1% a year from 2016.
Although 85% of the French population are internet users, ecommerce has experienced quite conservative growth.
France spending stats
80%of all French internet
users buy online
V54% 46
%
The majority of mcommerce transactions are made on a smartphone vs a tablet
6.2%of all retail sales
by 2018
2014 2015
2016
2017
2018
0
10
20
30
40
50
60
70
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
Ecommerce as a % Retail Sales France Retail Footfall Ecommerce £(bn)
-1%Forecasted
decline in retail footfall per year
Source: ecommercenews, Dec 2014 Source: ecommercenews, Oct 2015http://ecommercenews.eu/80-of-all-french-internet-users-buy-online/ http://ecommercenews.eu/mobile-commerce-in-europe-2015/ 7
Predicted online sales to reach
Germany
It’s no surprise that retail footfall has been experiencing decline as a result. In 2015 it fell -4% Year-on-Year, although there was a modest +1.28% recovery in 2015.
Ecommerce in Germany has quite conservative growth predictions over the next few years of around 1% annually, peaking at 11.2% of all retail sales by 2018.
2014
2015
2016
2017
2018
0
20
40
60
80
100
120
German Retail Footfall
Ecommerce as a % Retail Sales
-6%
-2%
0%
2%
6%
10%
12%
4%
Ecommerce $(bn)
11.2%of all retail sales
by 2018
65% of population own a smartphone
German spending stats
Source: Ecommerce Newshttp://ecommercenews.eu/key-figures-mobile-commerce-europe-revealed/
-4%
8%
86.8% of the German population have access to the internet €653
2015 spend per internet user
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Predicted online sales to peak at
China
By 2018, web-based sales will account for 28% of the overall market – and 70% of these will be generated by a mobile device.
This will have a marked effect on retail footfall, particularly as there is limited digital connectivity among Chinese shoppers compared to many other regions.
At present, only 46% of China’s 1.4 billion population has online access. Increased smartphone ownership and internet penetration will help sustain digital retail growth.
Significant growth is predicted in China’s ecommerce market over the next few years, with annual online spending increasing by 30%.
28%of overall retail sales
by 2018
China spending stats
Ecommerce £(bn) Mcommerce £(bn) China Retail footfall
Ecommerce as a % Retail Sales Mcommerce as % of Ecommerce Sales
423.4 million online
shoppers predicted in 2016
594 million mobile internet users: 89% of all China’s internet users
Ecommerce generated approximately 10% of total consumer retail sales
0
200
400
600
800
1000
1200
1400
1600
1800
0%
-10%
10%
20%
30%
40%
50%
60%
Source: eMarketer, Jul 2015Source: Go GlobeSource: Tech Asiahttp://www.internetlivestats.com/internet-users-by-country/ https://us.searchlaboratory.com/2015/08/global-opportunities-for-online-retailers-2015/http://www.emarketer.com/Article/Ecommerce-Drives-Retail-Sales-Growth-China/1013028 http://www.go-globe.com/blog/ecommerce-in-china/https://www.techinasia.com/china-internet-social-media-ecommerce-stats-2015
89%
9
Predicted online sales to account for
Japan
That being said, the ecommerce opportunity as a whole is only predicted to grow at a modest 0.5% per year, accounting for around 5% of total sales by 2018.
With this in mind, Japanese retailers and shopping centres are well advised to bring mobile into their bricks-and-mortar strategies, to drive digital engagement in the physical environment.
Changes in the Japanese retail landscape are being powered predominantly by mobile commerce; around 50% of online retail transactions currently happen through a mobile device.
2014
2015
2016
2017
2018
0
20
40
60
80
100
120
Ecommerce £(bn) Ecommerce as a % Retail Sales
0%
1%
2%
3%
5%
6%
7%
4%
Japan Retail Footfall
5%
of total retail sales by 2018
90758 Yen online spend per internet user in 2015
Japan spending stats
6.5million
smartphone users predicted
by 2018
43.6 millionactive mobile internet users
Source: eMarketerhttp://www.internetlivestats.com/internet-users-by-country/ https://us.searchlaboratory.com/2015/08/global-opportunities-for-online-retailers-2015/http://www.criteo.com/resources/mobile-commerce/ http://www.emarketer.com/Article/2-Billion-Consumers-Worldwide-Smartphones-by-2016/1011694
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Predicted online sales to account for
USA
However, there is reasonable growth forecast over the next couple of years – ecommerce will be responsible for 8.3% of overall retail sales, equivalent to $442 billion, by 2018.
There is a clear opportunity in the mobile engagement space for US retail organisations, as consumers spend longer browsing the internet through their smartphone than any other nation: 2 hours 27 minutes per day in total.
Bricks-and-mortar still rules in the USA when compared to online activity.
8.3%of overall retail
sales by 2018totalling
$442 billion
USA spending stats
0
1000
2000
3000
4000
5000
6000
0%
5%
10%
15%
20%
25%
30%
2013 2014 2015 2016 2017 2018
Ecommerce £(bn) Mcommerce £(bn) Bricks-and-Mortar $(bn)
Ecommerce as a % Retail Sales Mcommerce as % of Ecommerce Sales
86.75% have access to
the internet
$1227 2015 spend
per internet user
74% of mobile shoppers visit retail websites
US consumers will spend $327 billion online in 2016, an increase of 62% from 2011.
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Predicted online sales to account for
Therefore, in order to increase opportunities in the bricks-and-mortar environment, retailers and shopping centres need to drive greater customer interaction through online capabilities, as seamlessly as possible.
From a shopper’s perspective, this means encouraging them to use their mobile devices in a controlled manner. For example, providing a free Wi-Fi service, producing an informative app, or implementing digital kiosks for assistance and transactions, to provide a contextually sensitive experience.
From an organisational perspective, this means leveraging information to better understand how ecommerce is influencing bricks-and-mortar behaviour; consumers are still relatively anonymous in the store or shopping centre environment, compared to data-driven online platforms.
Therefore, retail businesses must go beyond commonly collected metrics such as people counting, and utilise the latest retail intelligence solutions that provide a 360 degree view of shopper activity, to fully understand what consumers want from physical retail.
As these trends show, the pace of change may differ between regions, but consumers as a whole are moving towards greater digital engagement.
How can the retail industry make clicks drive bricks?
www.shoppertrak.com
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