Published Tuesday 16th April 2019
The growth of e-commerce has had a profound effect on retail. Figures by Statista show that from 2013 to 2017, total B2C e-commerce sales in the UK rose by over 50%, from £94.8bn to £145.6bn. More importantly, however, the overall percentage of UK consumers to have made an online purchase has also dramatically risen over the last ten years, from 53% in 2008 to 78% in 2018. Over the previous decade, the internet has become an undeniable force in the commercial marketplace, shaping buyer behaviour and decision making.
This growth has coincided with one of the most challenging periods in the history of traditional retail. In March, CBI reported that UK retail sales fell at their fastest rate in over a year. Whilst this latest decline was primarily attributed to political and economic uncertainty surrounding Brexit, it is but the latest in a string of retail negatives dating back to the financial crisis and beyond. With many seemingly stable UK retail giants falling into administration over the last decade whilst Amazon and other e-commerce sites see soaring profits, for some this feels like the inevitable conclusion to traditional retail. In a way, this is correct, but there are companies which are showing how bricks-and-mortar stores can survive in the modern age.
E-Commerce Raising Consumer Expectations
Unfortunately for traditional retail businesses, the UK has been one of the fastest adopters of online shopping in the world. In 2015, the UK was the third biggest e-commerce market, only surpassed by the USA and China. With such a widespread, wholehearted adoption by the consumer base, it’s no surprise that for many, the online experience has become the standard for all shopping.
E-commerce presents many benefits to the individual, hence its growing popularity. One of the main advantages that has seen such quick adoption is the price competitiveness of the platform. Shopping online allows consumers to compare prices for the same or similar goods, something that has become increasingly important to many in the post-crash world of prudent spending. Also, by avoiding the costs associated with running stores, online retailers are further able to reduce prices. Amazon has excelled in both these areas but particularly the latter, leaving many traditional retail operators simply unable to compete on price.
Amazon, in particular, has also introduced a range of other benefits that are becoming commonplace in the retail market. Quick, hassle-free delivery and returns mean that consumers are more confident shopping online, whilst a personalised and streamlined experience makes online purchases significantly easier. These benefits are not only the norm for online shopping but are also shaping the bricks-and-mortar experience. Consumers now expect traditional retailers to match their online counterparts regarding 24-hour customer service, a hassle-free experience, discounted offers and quick delivery and returns where applicable. This is creating yet more challenges for traditional retail, especially for businesses that lack the infrastructure or flexibility to adapt to the rapidly-changing landscape.
Differentiating Traditional from E-Commerce Retail
Many businesses that have tried to compete with Amazon have struggled or, in the worst-case scenario, fallen into administration. A notable example is the many discount stores that have walked this path over the last few years, with companies such as Poundworld and the owners of retail chain Bargain Booze going into administration in 2018. These operators should have been able to compete with the online stores on price, speed and convenience, and whilst the reasons for their conclusion are long-reaching, the changing consumer habits and impact of the online space are undeniable contributors.
The collapse of several retail giants is further evidence that it is difficult to compete against Amazon and other e-commerce sites on what they do best. This means that there must be new ways to attract people into retail stores, a belief which is creating the rise of ‘experience retail’.
To compete against online stores, traditional retailers need to create in-store experiences that entice customers out of their living spaces and into their shops. This can come in many forms, depending on the retailer, consumer demographics and marketplace in question. Many in the fashion retail space, with younger target audiences that are particularly linked to the online world, are reinventing their stores with a combination of brand items and additional extras designed to create engagement, both online and for the consumer in-store. There has been a rise in the number of retailers offering extra services at their locations, often utilising the few businesses that have seen consistent bricks-and-mortar growth over the last decade, such as bookstores and beauty salons, for their own development.
A recent example of this is the opening of the largest ever Primark store in Birmingham. A low-price fashion retailer, their new flagship location features a barber shop, beauty salon and Disney-themed café alongside Primark products. This design entices people to ‘experience’ the store, bringing them into the location where they can make purchases. Many more companies are revolutionising their in-store experience through a combination of service offerings and other store additions, such as product customisation and further interactive content that combines the traditional store with online customs.
It is undeniable that the online space is having a significant effect on all business markets, and the evolution of e-commerce suggests that its growth may be far from finished. However, proactive companies are beginning to understand how to compete against giants like Amazon by offering a unique experience to the modern consumer.
For many major businesses, succeeding in this modern retail landscape will require substantial changes in business practices, including a significant investment in infrastructure. This restructuring isn’t always easy, especially at a time when traditional retailers are struggling to maintain profits. This is where ERA can help.
Here at ERA, we have been helping major UK businesses reduce retail operating costs for many years. Our specialists have experience working with some of the UK’s biggest retailers and can save your business money in a range of cost areas, from distribution and packaging to logistics and utilities. It is vital that retailers begin to act on these changes in consumer expectations, and ERA can help unlock the capital required to make it happen, ensuring the efficiency of your company through long-term procurement strategies. So, if you are interested in seeing what we could do for your business, get in contact with us today.