Clicks vs. Bricks

How we shop has changed dramatically over the past decade, and business has had to adapt with it. Was the threat of the ‘death of retail’ greatly exaggerated, and where is retail going from here if not?

 

The parameters of UK retail have greatly developed and shifted over the past five or so years, and are set to continue to change at an ever-increasing rate for the foreseeable future. The growth of digital and mobile technology has shaped the way that we go about our everyday lives, the way we shop and the way we run business, transforming the retail landscape forever. Consumers quickly clocked onto the ease and efficiency that online retail and ecommerce brought with it, but high street retailers may have been a bit slower to adapt: not surprising given that bricks and mortar shopping was the only means of buying products before the 1990s. This created an up-and-down rollercoaster of speculation as statistic after statistic rolled in: is this the death of retail as we know it or is this a changing phase?

It was in 1994 that most would agree the first online transaction was made – successfully – and look how far we’ve come since. Just over 20 years has seen perhaps the biggest technological shift any of us has ever seen, and the transformation is still taking place at an alarming rate. Now, retailers face significant structural change as more and more consumers head online over heading out to their local high street or main shopping centre. In December 2015, online sales represented 19.7% of total non-food sales, against 17.3% in December 2014, meaning almost 1 in 5 pounds was spent online. Online sales contributed 3.0 percentage points to the year-on-year growth of non-food total sales in December, which is the highest on record, while stores made a negative contribution. Why?

David McCorquodale, Head of Retail at KPMG, said: “With 190% of average rainfall in December, many consumers chose to login rather than walk in over the festive period. There was marked increase in online shopping this year with that channel producing its highest contribution percentage to non-food sales growth compared to a decline in store growth.”

The weather wasn’t the only reason for this decline in traditional retail: consumer behaviour has altered greatly due to the convenience of online channels whether it’s raining or not, and fulfilment networks becoming increasingly slick and reliable means that the sunniest of days still can’t entice people out of their homes. Retailers now strive to deliver a perfectly seamless omni-channel shopping experience for their customers, and hats off to them for adapting so well. In 2015, 44.3% of global Internet users had purchased products online. In 2016, it’s estimated to be 45.4% and businesses are gearing towards this growth, and have been for a couple of years. According to law firm, TLT’s retail growth strategies report in 2015, whilst the majority regarded physical stores as ‘vital’ to their future, and 73% of retailers expected to have the same number or more stores by the end of the year, in 2015, more than a third of retailers planned to invest more than they did in 2014 into online developments. Even of that majority still holding onto the traditional format, 46% believed that retailers would soon need fewer, but larger stores.

Helen Dickinson, Chief Executive of the British Retail Consortium gave an overview of consumer behaviour leading up to and over Christmas: “The proportion of online spend was up across all categories we measure with household appliances, footwear and furniture leading the way. Over the three months to December, online contributed 2.5 percentage points to UK non-food growth overall, confirming this channel as the key driver of growth. In fact, store sales were in reverse.”

But people still care about high streets, simply because they are more often than not the centres of their community. This is what has, and will, save bricks and mortar business from completely disappearing. In addition, the majority of high street retailers are providing a more than efficient alternative to both: a combination of online and traditional shopping.

Click & Collect, a new and exciting phenomenon in 2010, provided consumers with a way of shopping online, but being able to collect their purchases themselves – a mix of click and brick that benefited both the customer and the retailer. The success of this system over the past 6 years perfectly demonstrates how society has adapted to a digital-physical combined world, and the loyalty most consumers feel to traditional retail channels.

Helen Dickinson added: “Click & Collect has continued to be instrumental, providing convenience for consumers and equipping smaller format stores with extended product ranges during the busy Christmas period. There were also some knock-on benefits, such as encouraging greater footfall into stores, in turn inspiring impulse buys.”

Data suggests that, on average, Click & Collect generates £27 in additional spending as three quarters of shoppers tend to impulse buy, spending more money on additional goods and services whilst out collecting what they’ve already bought – this then fuels money back into bricks and mortar retail units.

TLT’s research suggests that Click & Collect not only provided a link between physical stores and internet sales, but neatly justified both; a relief at a time when a significant number of retailers admit that knowing which technologies to back is an issue (46%). Steve Heywood, UK spokesman for eBay.co.uk commented: “The reality is that some people may start on their mobile and finish in a store, and vice versa. It’s all part of the same process and the customer doesn’t really care. Retailers need to understand that it isn’t about winner takes all, it’s about taking all to win.”

This technology-driven adaptation has only continued to be developed on, and now the options are pretty extraordinary. Customers can browse on-line and pick up in store; browse in store and deliver to home; browse in-store and discount to item or related items on line; pay with a biometric system using individual loyalty discounts in-store; or simply shopping, in-store with geo-located details.

Many of the new found technologies and shopping solutions may not become as widely adopted as promised, or as successful as they sound, but one thing is certain: we are living in a retail renaissance. Businesses across the online and traditional sales sectors are experimenting with new ideas: 61% of retailers considering this experimentation with cutting edge technologies an important thing to do, despite the uncertainty within the sector as a whole.

Near Field Communication, Biometrics, Voice Recognition, GPS, 3D printing, Virtual Reality, Robotics and even MRI are in use across the board – all providing an interconnected customer service that can be vastly adapted for any business’ use and need, harnessing all of it to secure insights that will enable dynamic marketing and in-store innovation.

According to the growth report by TLT, most retailers expected growth to come from online sales through mobiles and tablets in 2015, and continue to this year, planning to invest much more in these areas (69%). Further evidence that retailers are preparing for an increasingly online future comes from their plans to invest in improved IT systems (61%) and logistics (57%) as well as increasing online team staff (41%). As such, creating a better website presence is considered a key area of investment this year as retailers try to satisfy evermore demanding customers in an increasingly global marketplace.

The high streets must indeed adapt to survive the technological revolution, and councils, businesses and communities must work together to deliver that. However, the term ‘survival’ should be used loosely when talking about high street retail: it’s not dying, just being reborn.