A December 2014 analysis by New York-based digital market research firm eMarketer estimates combined online and offline retail sales worldwide touched $22.49 trillion (Dh82.6 trillion), and is expected to grow 5.5 per cent by 2018 to reach $28.30 trillion.
E-commerce grabbed 5.9 per cent of the pie, or $1.31 trillion. However, it will “account for just a fraction of in-store purchases” even as it nears $2.5 trillion by 2018. “E-commerce share of total retail sales can mean different things in different markets,” says the eMarketer analysis.
“In the US, this metric shows the continued strength of brick-and-mortar retail, as well as consumer appetite for purchasing in-store.”
More than $10 out of every $11 spent by US consumers is in stores, adds the report.
That said, old-school retailers are waking up to what Julie Krueger, Industry Director, Retail at Google called “an emerging retail reality” in a March 2015 blog post.
An “omni-channel” retail strategy also boosts in-store sales for retailers. Krueger noted that “a shopper buying from them in-store and online is their most valuable customer”, and refers to a 2015 study by global market intelligence provider IDC, which shows such omni-channel buyers have a 30 per cent higher lifetime value than those who shop on only one channel.
Wherever you go
Omar Kassim, CEO of online marketplace JadoPado, believes by 2020 we will see much stronger, more tightly integrated online and offline shopping experiences.
“The industry terminology today is omni-channel, but what I’m trying to describe is more channel-doesn’t-matter, where a consumer transacts will stop mattering, and all we’ll care about is that they’re transacting in the first place,” he says, adding that retailers, manufacturers and brands will start to gravitate towards serving consumers everywhere they can.
“That could mean stronger browsing and showroom concepts in-store, with the actual purchase taking place on your device, on your TV and then being delivered to where you want it.”
Social shopping
Ronaldo Mouchawar, CEO and Co-founder of Souq.com, agrees that omni-channel will be an “important strategy” for all brands and retail stores going forward.
Acquiring social media followers, conversing with them, and turning them into brand ambassadors will also play a vital role. Retailers will use online platforms to test product appeal.
“A lot of product recommendations would be generated on social media and customised to suit one’s need,” says Mouchawar.
“Based on the number of likes for a particular dress, one could decide whether to buy a product or skip it.”
Meanwhile, Facebook is currently testing ways for its users to discover, share, and purchase products on its app. Considering the size social network’s user base, the move could be a game changer for retail.
The future is glocal
In a report titled Retailing 2020: Winning in a polarised world, PwC forecasts successful retailers will have an “enhanced understanding of market fragments and patterns of growth and will be able to operate and manage glocally — on a global scale with attention to local needs”.
They will start selling across the world, far away from their home markets, while customising the experience for each location.
“By 2020, we anticipate that best-in-class retailers will operate using the concept of trading ecosystems, adept at understanding how those ecosystems require different competitive strategies,” says the study.
Two of the world’s largest retail markets — the US and China — will yield “disproportionate reward to the retailers that master and exploit similarities and differences in these ecosystems”, the study adds.
Similarly, the IBM report, Retail 2020: Reinventing retailing — once again, states that emerging markets like Brazil, China and India will create exciting growth opportunities for resourceful retailers.
“We are already seeing many examples of retailers with strong brands move into foreign markets,” it adds.
“We will see this trend accelerate as retailers who have the resources go after consumers who fit with their brands, wherever they are.”
The world is your shop
National boundaries will become meaningless for shoppers, with favourite retailers just a tap away.
“A number of early adopter customers are shopping where and when they want, globally aided by a plethora of e-commerce players, delivery networks and service providers such as Shop & Ship,” says Kassim.
He expects this trend to continue disrupting traditional country-specific “distributors” and eventually remove them from the supply chain.
“Expect more brands delivering their experiences directly and through scalable platforms to consumers,” adds Kassim. “It won’t matter if a brand is or isn’t present in Country X as long as they can ship [there]. Call it consumer globalisation, if you will.”
Transparency and loyalty
Consumer globalisation is improving customer awareness of options and prices. The IBM report notes that while producers were in control in the early part of the 20th century, this has completely shifted to the consumer for many types of products.
“The internet has provided transparency, information and options that enable consumers to shift demand rapidly to the retailers and brands that they prefer,” it says.
“Maintaining customer loyalty and trust has become harder, but more important than ever, as consumers can shift providers in a moment, if unsatisfied.”
It adds that knowledge of the consumer, their shopping behaviour and how to influence them has become a science.
Meanwhile, in another study, Trends in Retail 2020, Mark Sievers, Head of Consumer Markets, KPMG Germany, writes that the “dramatic spread of smartphones and tablets” will continue to change the way consumers make their purchases and how retailers will need to communicate with customers.
“Consumers are now able to access vast amounts of information via mobile devices and have therefore never had as much transparency over products and their prices as they now have at their fingertips,” adding that smart devices also provide retailers new ways to communicate with customers.
Beyond selling
Shopping malls will transform by 2020.
Many will opt for smaller retail spaces, while others will find innovative use for the excess space. The IBM report observes the shopping experience has been largely unchanged, from a consumer perspective, for over 30 years.
“Retailers have the ability to integrate analytics and location-based technology to invent new ways to serve their customers,” it explains.
“Whether it’s something fresh and unique or visually exciting, or services that are truly valued, the bar will be much higher for the consumer of 2020 than it is for today’s customers”.
Meanwhile, store staff will morph into “solution specialists” who can match products and services with shoppers’ exact needs.
“Successful retailers in 2020 need to rethink the role of store associates and how they are enabled and measured, to turn them into part of the reason consumers come to shop at their stores,” says the IBM report.
Kassim predicts that by 2020 we will see “more niche brands, more niche categories, more opportunities” that mesh various concepts together.
“While having lunch, order products from your watch, and have them delivered to your table before you’re ready to leave,” he says. “Should be lots of fun.”
The fridge will do the restocking
In future, retailers will increasingly use smart devices that influence what you buy and where you buy it from.
“You should start seeing hardware that anticipates low supply and re-orders automatically,” says Kassim.
“I don’t want to bring back the perennial self-ordering fridge example, but we’re definitely heading in that direction.”
He believes currently the challenge has been the availability of aggregated platforms that have the ability to be an end-point for this hardware.
“Both Amazon and businesses such as ourselves at JadoPado look to address that need and will provide a way for hardware to use an application programming interface or API to reach out to both next and existing supply chains that can efficient supply that need,” he explains.
