Way back in 1995, if someone would have predicted that e-commerce sales would account for less than 10 percent of total retail sales by 2015, that person likely would have been disregarded by industry commentators and analysts as out of touch or simply “not getting it.” Yet, here now in that very future, that is precisely where we stand, with online sales, according to the latest data from the U.S. Department of Commerce, representing about 7 percent of total retail sales.
Perhaps we should have known this all along, as retail executives seem to be coming to an understanding of why that might be.
If we look at various surveys designed to dissect retail executives’ greatest challenges, concerns and opportunities, as well as where technology expenditures are being directed, we can see a decided shift in retailers’ mindsets. For most of the 2000s, there was an emphasis on catching up and keeping pace with the explosion in online shopping and the larger, outside competitive threats that appeared destined to gobble up market share. More recently, attention has turned from finding and following customers to enhancing each customer’s “experience” once inside a store or location.
Indeed, the slower-than-expected growth of online sales, as a percentage of the overall, seems to suggest that in today’s culture, shopping for many Americans is more than just a search and a transaction; it’s more than the simple acquisition of a good or service. If someone, after all, simply wants a good price and great selection, all while expending the least amount of time and effort, shopping from your couch wins out every time. But shopping also can be a pastime or an activity, for some it’s even a hobby. Often, it’s a reason to get out of the house. And within this shopping experience, consumers seem to be telling us that they desire the ability to touch and feel, to interact with humans if needed or to just have a nice environment to spend part of an afternoon. Within that context, online shopping is just one – albeit important – component of the shopping experience
“The notion of different selling channels means nothing to most consumers; it’s just shopping, redefined,” says Retail Systems Research analysts. “And even though it is now possible for consumers to start and finish a purchase completely ‘inside’ the digital domain, retailers have learned that consumers still prefer the social experience of the store.”
It’s largely why we’ve seen so many online pure plays and consumer brands open brick-and-mortar doors. It’s also likely why “webrooming,” or the act of researching online and then visiting a physical store to purchase, has grown even more prevalent than “showrooming,” and it’s likely linked to moves by mass merchants to downsize to smaller, “marketplace” stores.
Fortunately, it’s a reality that plays into the hands of specialty retailers, who have the luxury of tailoring the store environment (or experience) to relatively narrower audiences, and hence can up the ante when it comes to personalized service and selection. Yet, even so, specialty by no means can stand pat. Even if online retail stays at around 10 percent of sales for 10 more years, e-commerce has had other profound effects on retail. Namely, it has injected technology deep into the veins of both the retail “experience” and the business model.
Historically, retail was a low-tech business. As a vertical, it traditionally ranked among the lowest in terms of tech spending and typically was slow to adopt, generally upgrading only when existing systems met their end of life. Fast forward and we now see cloud and packaged solutions providers across the spectrum of business IT with retail-specific business divisions offering retail-specific solution suites. Indeed, retail has become a leading vertical for tech companies to target. Research firm Computer Economics, for one, lists the retail vertical as a top-spender on IT in 2015.
It’s not hard to understand why. In the onmi-channel realm of the smartphone-enabled “phy-gital shopper,” the benefits once exclusive to the digital world are synonymous with the shopping experience, no matter what the channel. Consumers expect to have access to information, comparisons and suggestions; speed, convenience and a wide assortment; personalized, flexible and smart service, regardless of the device or location.
Make no mistake, keeping up with this demand will require massive investments in technology and know-how on the part brick-and-mortar dealers. It will require beacons and Bluetooth, connected kiosks and smart monitors, interactive displays and data-crunching algorithms, geo-location and mobile payment applications, all integrated with the Internet, the cloud and wireless networks.
In the not-so-distance future, and assuming consumers’ love affair with the smartphone continues to explode, it will be hard to find a physical retail location that is not operating a robust wireless area network (WAN), as well as possibly a storage area network, a content delivery mechanism and a multitude of cloud-based services. The upshot is that store owners, executives and managers will have to become either at least somewhat proficient in various technologies or they will need to hire staff members or outside consultants who are.
After all, we can’t expect the predicted explosion in spending on retail technology to go exclusively to a part of the business that represents just 10 percent of sales. –MV
