Earlier this year, the British Retail Consortium published research showing that online sales of non-food items have dramatically increased over the past five years. In December 2012, they accounted for 11.6 percent of the total market. At the end of 2017, that figure stood at 24.1 percent: nearly one-quarter of all sales.
If the same trend continues into the Christmas period this year, non-food retail will be nearly 27 percent online.
Meanwhile, retail and Web services giant Amazon is among those booming. In recent weeks it has announced 2,500 new jobs in the UK, bringing the total employed in the country to 28,000, and 1,000 more in Ireland.
Meanwhile, in many towns and cities empty, boarded-up shops increase in number, while newspaper headlines talk of big names either going to the wall, or downsizing. In the UK, for example, M&S, Mothercare, and House of Fraser have all recently announced large-scale closures.
On the surface, at least, their loss would appear to be Amazon’s gain.
However, not everyone is convinced that bricks and mortar retail is dying on its feet. In a recent interview, Apple’s retail chief Angela Ahrendts shared her thoughts on the future of the sector and addressed claims that physical stores are heading, en masse, towards obsolescence.
Customers are increasingly heading online in search of convenience, value and choice. So the logical question is: At what point will that shift stop, and how many physical retailers will be left standing when it does?
The difference between shopping and buying
“The smart outside guys, they don’t say retail’s dying,” said Ahrendts. “They say digital’s going to grow at three times the rate of physical. But in the next five years – and this is a McKinsey number – 75 percent of people will shop online — shop, to ‘learn’.
“But 75 percent of the business will still be done in physical stores. And so retail’s not going away. Retail’s not dying. But it has to evolve. I think it has to serve a bigger purpose than just selling.”
Some really interesting insight on the future of retail from Apple's @AngelaAhrendts!
— Cannes Lions (@Cannes_Lions) June 20, 2018
Fortunately for bricks-and-mortar-based retailers, the plateau for online growth may be in sight. After all, there are some consumer desires that aren’t currently met in the online process.
Trying on clothes, feeling fabrics, holding a new phone in your hands. Unless there’s a major uptake in virtual reality retail technology, the act of visiting shops to go through these integral aspects of the retail experience will continue.
The ‘Click and Collect’ concept also relies on brands having a network of stores that shoppers can drop into at their leisure.
Apple’s views on the matter should be taken seriously: its own bricks-and-mortar outlets have been the world’s top retail earners in sales per square foot for the past seven years. That’s likely a combination of brand popularity, selling high-ticket items, and the awareness that speaking with one of Apple’s ‘Geniuses’ has become an accepted part of the buying process.
And that’s an important lesson: Apple’s own in-store experts offer something that simple ‘click and buy’ online retail does not: an experience that can’t be easily replicated with a chatbot.
Meanwhile, Ahrendts herself was CEO of Burberry for eight years before joining Apple in 2014, with a long career in retail and merchandising across multiple brands.
The evolution of retail
However, evolution is still required if physical retailers, aside from Apple, want to stay competitive. That evolution could take many forms.
As Ahrendts explained, it could be that for more complex and expensive products, the difference between shopping and buying will become more overt. The former is increasingly taking place online, but the actual purchase will often still be carried out in the physical world.
But in other cases, of course, buyers may look at items in the physical world, and then go for the lowest cost online, or use low-cost options online to barter with in store. It’s a buyers’ market.
For more everyday items, physical stores need to evolve to offer similar levels of convenience to online retailers. One example is Amazon’s exploration of cashier-less stores, with Amazon Go. Another is the adoption by the Co-op and others of queue-less shopping in store via smartphone, powered by electronic payment specialists, such as Mastercard.
Allowing customers to walk in, grab what they need, and walk out again is just one way that retailers can recreate the convenience of the online experience.
Internet of Business says
Apple’s Angela Ahrendts alludes to the fact that retail stores will have to “do more than just sell” in future, and the company’s own successes in the space are evidence of that: a shop full of technology demonstrations, and demonstrators. It’s likely that whatever form that process of evolution takes, IoT technology will be at its core.
Here are some of our recent reports on digital-, AI-, and IoT-enabled retail:
- Read more: Retail IoT: PayPal acquires iZettle for $2.2 billion
- Read more: Why Alibaba’s ‘New Retail’ revolution is all about AI
- Read more: Retail IoT: Why AI is the big opportunity | Special report
- Read more: New Walmart patents signal a push towards Retail 2.0
- Read more: Retail IoT: Why Vodafone’s digital fitting rooms are a good fit for Mango
- Read more: Retail IoT: Shoppers demand AI, VR, and a better fit online
Additional analysis: Chris Middleton.