For Retail, ‘Bricks’ Still Overwhelm ‘Clicks’ As More Than 90 Percent Of Sales Happened In Stores
And don't expect a vast change in consumer habits any time soon: By 2019, eMarketer estimates that e-commerce will represent just 9.8 percent of US retail sales.
As the holiday shopping season winds down amid expectations of slower spending and speculation of the diminished importance of Black Friday, it’s worth noting: e-commerce is not just a sliver of all retail sales activity, it’s likely to remain so for years to come.
The latest research from eMarketer bears that out. And it’s not just the US; the hegemony of brick-and-mortar business over e-commerce is worldwide, albeit to slightly varying degrees, the researcher says:
The vast majority of the nearly $5 trillion in US retail sales occur in stores. This year, retail e-commerce accounted for just 7.1 percent of all retail sales in the US — though that share is growing. By 2019, eMarketer estimates, 9.8 percent of US retail sales will be transacted over the internet. The US, where this share is in line with the North American average, is slightly behind Western Europe, where 7.5 percent of retail sales were transacted online this year. In Asia-Pacific, the share is 10.2 percent, the highest in the world.
While much of the research appears to falsely pit “bricks vs. clicks,” a nod to the fact that many retailers had separate divisions and P&Ls for their physical and digital businesses, after a decade of internecine warfare, retailers are increasingly knocking down those walls in favor of online-to-offline strategies.
And like much of the revolution in shopping and marketing, mobile has been the source of that truce. As opposed to the idea of lugging a PC into store aisles, the near-constant use of smartphone in a consumer’s hand as they move through physical spaces has made the idea of clicks-to-bricks the more common focus of retail marketing. At a time of predictions, that idea can practically be called truism as we head into 2016.
When it comes to the health of retail in the 2015 holiday season, there appears to be cause for contentment, if not celebration, the NRF says.
Retail sales for November — not counting cars, gas, and dining — were essentially flat with a mere 0.5 percent sequential gain over October and a decent 3 percent rise from the same period a year ago.
“That’s a welcome increase, but less impressive than what we had expected,” said the NRF’s Jack Kleinhenz. “A closer look at the numbers reveals that while fewer dollars are coming in than expected, that doesn’t mean consumers are shopping less. In fact, unit volume appears to be up. The issue is that prices are down. And that means the same number of sweaters, toys or electronic gadgets sold brings retailers less revenue.”
One problem facing retailers is that consumers have become so conditioned to expect ever lower prices during the holiday season.
CNBC cited Jefferies analyst Randal Konik, who noted that Gap, Old Navy, and Ann Taylor “all offered 50 percent off the entire store, while Michael Kors offered the same tiered discount that it featured during Black Friday.”
Much to the consternation of businesses that have embraced app-based discounts to entice people into stores, shoppers’ assumptions about deals has becoming more ingrained. There has been a movement toward using apps and sensors, such as beacons, to “enhance the in-store” through wayfinding, curbside pickup, access to additional product information, and the creation of “virtual sales representatives.”
Those “omnichannel” methods are certainly gaining traction, but they won’t become a regular feature at most retailers overnight. For the moment, retailers can quickly adjust their online-to-offline marketing programs through mobile programmatic platforms to target those “last minute shoppers.” And there is likely to be plenty of procrastinators left, as the NRF noted last week that 90 percent of consumers were still in the process of completing their holiday purchases.