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Jul 9, 2019
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E-tail to be 50%+ of all sales in a decade, digital revolution has long way to run

Published
Jul 9, 2019

Online retail is fast approaching its tipping point in the UK with a new report predicting that it will reach 53% of all retail by 2028. It currently sits at 19%. This suggests that, despite the current devastation being seen in physical retail, there could be much more pain to come and countries where online sales are a much smaller percentage of the total at present could also be in line for some of the issues that the UK is currently enduring.


Shopping online should be the dominant channel within a decade in the UK



The report, called The Digital Tipping Point, was commissioned from Retail Economics by law firm Womble Bond Dickinson (WBD) which advises retailers. It said that the growth to be seen online will be powered by three primary factors: the changing demographic of the UK adult population; the development of faster, cheaper, in-home deliveries; and fewer physical stores. 

The growth will accelerate as Millennial and Gen Z digital natives are set to account for half of adult consumers within 10 years. The research showed that 62% of Gen Z shop online at least every fortnight, compared with just 29% for the 65+ group. And Millennials spend the highest proportion of their total spend online currently (22.1%), averaging £42.32 per online transaction and £110.45 each month.

So what’s influencing their behaviour and what do they buy? Some 53% of Gen Z consumers said smartphones influenced them most in terms of 'awareness of new retailers/brands compared with just 3% for 65+, which means mobile marketing has a much bigger impact on the youth consumer.

Yet even with their addiction to e-shopping and especially to m-commerce, the study said almost a quarter of Gen Zs are more likely to do their shopping on high streets and in shopping centres, “highlighting the complexity of the customer journey and the importance of shopping experiences for these younger consumers.”

EASY DELIVERY AND RETURNS ARE KEY

But there’s no denying that online is the future and that future will come closer even faster if retailers take certain actions. Survey respondents said the top three factors that would accelerate their e-shopping shift are cheaper (47%) and faster (26%) delivery and easier returns (26%) all of which are key areas of investment for retailers looking to own more of the digital market. 

Those figures are magnified for Gen Z and Millennials. Easy returns, for instance, are rated as key by 28% of Gen Z and 30% of Millennials. And as retailers develop multiple delivery options, delivery is increasingly becoming a key battleground for winning the hearts, minds and wallets of young shoppers. The report said  there’s a rising trend of in-home deliveries (deliveries while homeowners are out), which is expected to grow as young shoppers embrace the concept.

Subscription and auto-replenishment business models are also appealing to younger shoppers and are helping to further increase online penetration rates for repeat purchases.

So where does all this leave physical shops? In many cases, going nowhere fast. After “five consecutive years of net closures of retail stores and with dwindling levels of footfall across high streets, shopping centres and retail parks, this trend seems set to continue,” the report said. 

Some 10% of consumers say they will shop less in physical stores in the next 12 months, which is more than those who say they’ll shop more.
The study also said that demand for retail property is at its lowest since the financial crisis of 2007 and the role of the store “has become polarised with flagship 'destination' stores continuing to attract sustainable levels of footfall, while other secondary locations with dwindling levels of footfall remain under pressure.”

Richard Lim of Retail Economics said: “It’s no exaggeration to say that the retail industry is undergoing a period of unprecedented change. Despite concurrent waves of political and economic upheaval in our midst, our work with retailers suggests this is a mere distraction from the seismic structural shifts reshaping the retail landscape.

“Successful retailers have always had to reinvent themselves to stay relevant. However, the pace of change will inevitably prove too fast for many – as shown by the number of CVAs hitting the headlines. While the impact of future technologies and consumer acceptance is highly uncertain, it definitely feels like the digital retail revolution is only just getting started.”

The report also issued a warning that retailers need to be increasingly vigilant as far as data protection is concerned if they want to profit from that revolution. It said more than a quarter of respondents “have taken some action to limit the amount of data shared with companies, reaching almost a third for 16-24 year-olds,” so those crucial young consumers are very nervous about data sharing.

Consumers are also sceptical about all the data companies hold on them and think that it benefits the companies more than it does their customers. Only 8% think the consumer benefits the most. But many would still be willing to share their data for rewards such as free or discounted products.

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