UK online retail sales were up by 12.1% year on year in 2017, according to IMRG and Capgemini. This is just under 2% lower than the previous year and many see this as a sign that eCommerce is maturing and that the mix of on and offline is stabilising. But can this be the case with so many new trends already showing signs of changing retail forever [again]?
THE RISE OF ‘SHOCIAL’
Our online habits are adapting to the plethora of channels available to us. For example, Social Media is now a source of sales for many businesses across the world. The so-called referral traffic, not much different in practise to a click-thru, is rising at a faster pace than all other channels. The Market Creative, a marketing agency, is so sure this trend will continue that they have named it ‘Shocial’ (Social Media Shopping). Even if the third-rate name does not last, the trend looks set to stay.
This rise in Shocial has led to more international shopping. As we click through the social post to a website that prices goods in our local currency, and has acceptable delivery charges, it seems that we are becoming less and less concerned about the source country.
LOOK BEFORE YOU BUY
Consumers have also moved away from shopping in a single store to shopping across channels. It is not unusual for any of us to browse online to review prices, check availability in our local store, cross check the delivery cost and lead time before making our final choice regarding the seller and delivery method.
This is a complex situation for a retailer to accommodate in terms of systems and logistics and one that is likely to become more complex and important in the future.
In marketing terms, traditional ways of differentiating are being eroded. Given the number of price-comparison websites that are available it would be a risky strategy to compete on price alone and, as consumers become more demanding, high levels of customer service are expected as a standard.
However, the desire for convenience seems to be growing. As mobile commerce continues to grow, shoppers are looking for a seamless, omni-channel experience that is both convenient and easy. After all, doing your ‘big shop’ on your tiny phone screen whilst on a moving train remains a challenge and this will have to change. While traditional browser-based shopping is still the largest portion of online sales, it will not be long before mobile takes over as, according to IMRG, it now represents 40% of transactions. Retailers must invest now to stay ahead of the game.
AMAZON STAYS ONE STEP AHEAD
The rise of ‘one-click’ and ‘browser-less’ commerce is the first sign that retailers are already thinking about this. As usual, Amazon tests the water and others follow. I think the success of ‘Alexa order some more cat food’ and the Amazon Dash Button has baffled a lot of us but, despite concerns regarding the security of online payment, the take-up has been huge. For many of us, this is a sure sign that convenience could become the number one factor.
The rise of the digital wallet is another example of this. 1 in 3 of us already use a version of a digital wallet and billions of pounds are spent without cash, cards or cheques because, let’s face it, it’s convenient!
BIG DATA AND GEO-TARGETING
Big data and geo-targeting will help retailers provide [or fake] convenience by ensuring we are offered products we like, when and where we like to see them. This is already happening and, although we might get great restaurant offers, we must have ‘location services’ switched on.
Apparently, when Fiat launched its new Fiat 500 campaign, they hit consumers with geo-targeted promotional messages within a half mile of their billboards. One in five people reported they were more likely to visit the dealership after seeing the campaign.
COUNTING THE COST
But before we get too excited, we should note that, whilst UK online retail sales grew by 9.1% in December and IMRG/Metapack say that 17.2% more parcels were delivered than in the same month of the previous year, it is also true that the average revenue per parcel (or purchase) is falling. This represents a real challenge for retailers and carriers.
At some point the true cost of delivery will have to be passed on to shoppers. The days of ‘free delivery’ cannot be sustained with the average value of shipments falling. How can a retailer offer next-day delivery on orders placed before 10pm for £5 or (even sometimes for free) when the required investment in systems and infrastructure is so huge?
At a recent Metapack conference, Martijn de Lange, CEO of Hermes UK, revealed that Hermes had invested £45m in new depots, £55m in IT and £40m in the courier-delivery network. The £150m investment equates to a lot of parcels and demonstrates real confidence in future growth.
Meanwhile John Lewis has totally restructured its approach in order to create a dynamic capability. For example, there is now no difference between online and store stock, sales items are often available online before stores open, and deliveries can be to store, from store, to home, or anywhere else. They are leading the market despite having been around since 1864. This does not come cheap. They are rumoured to have made a recent investment of around £200m, almost two fifths of which was on IT.
Retail trends in summary:
- MORE CONVENIENCE
- MORE MOBILE
- MORE CHOICES
Trends for Logistics businesses and departments:
- MORE CHALLENGES
- MORE INVESTMENT
The sector remains fast-paced and players will need to adapt to survive.
YOUR OMNICHANNEL SOLUTION
Does your operation provide a seamless cross-channel supply of goods or services? With consumer expectations increasingly growing and determining whether or not a customer continuously returns to you, it is extremely important your operations are able to keep up.