As the internet changes the way that people shop, four elements in particular offer insight as to why.
Everyone in retail knows that the internet is changing their business. But how will this wave of change play out?
The PricewaterhouseCoopers (PwC) Global Total Retail Survey sees four forces disrupting the industry:
Smarter shops: PwC argues retailers need to do more to keep customers coming back. It suggests stores can become “experiential venues” where customers can see and touch the product. Or they can just add convenience. Turkey’s Migros supermarket chain has kiosks where customers can browse and buy items not physically in stock.
Mobile appraisal: Consumers are buying via smartphone more than ever before. But retailers also pointed to the stock-checking, store-finding and other purchase activity happening through smartphones, even when people buy in the store.
Social media: Although it has a way to go, the use of social chat during purchasing is on the rise. PwC points to Stylinity, whose apps let customers photograph themselves wearing items in store, scan the barcode to upload details, then share the images with friends.
Demographics: The new wave of customers aged 18-24 has never known the world without the internet, and smartphones and social media are their natural communication channels.
While e-commerce lets us shop from home 24/7, it’s unlikely to replace the physical store anytime soon. Customers still need a physical store to try on merchandise. And most online product research still ends with a visit to a bricks-and-mortar outlet.
Or will it? PwC also reports that Russian fashion retailer Lamoda delivers to homes, allows customers to try on clothes, then takes away what they don’t want. There’s a lot of retail’s future still to come.
US in-store visits in 2009
US in-store visits in 2013
Source: Cushman & Wakefield in the Global PwC 2015 Total Retail Survey
While physical stores will survive, there will be less of them, especially in the US. Figures given to PwC by global real estate services firm Cushman & Wakefield tell the story: US retail visits dropped from 35 billion in 2009 to 25 billion in 2010, just over 20 billion by 2012 and 17 billion in 2013. The financial crisis didn’t help, but Cushman & Wakefield attributes much of the decline to e-commerce.
That decline leaves most stores with less foot traffic. At the same time, e-commerce is letting shoppers compare prices. The result is “less revenue [per square metre], and less margin on that revenue”, says the report.
China is the e-shopping champion
Who are the online shopping champions of the world? You might think the US, where 72 per cent of people shop online at least monthly. Or perhaps Germany, where 81 per cent of shoppers do it on the web, ranking them ahead of Japan (71 per cent) and Australia (68 per cent).
But the champion is China, where a startling 96 per cent of the population shops online every month, according to the PwC retail survey. It found 41 per cent of Chinese research brands on social media and 58 per cent would use digital currency. All that makes China the obvious country to watch for the future of online commerce.
See the PwC report
This article is from the June issue of INTHEBLACK.