The ongoing process of digitisation is fundamentally changing the nature of the retail trade. The speed and complexity of the process of change are enormous. The consequences have implications for businesses but also for other areas such as family life, leisure, education and mobility.
The growth of e-commerce has progressed unabated in recent years. Since 2011 it has in fact accelerated further compared with previous years to an average of 14% a year.1 However, total retail turnover in Germany has stagnated, with average annual growth of just 1% over the same period. What are the consequences of this for physical retailers?
It is widely understood that the growth of online commerce is tied to structural change, and the physical sales floor is under pressure. Turnover and frequency are migrating to the internet, sales floor productivity is decreasing, and 27% of today’s 16- to 25-year-olds believe that online stores could replace physical ones in the future.2 However, it’s also evident that the sales floor has not become obsolete. Traditional retail will not go away – but it will certainly evolve.
The transparency of offerings and prices enabled by the internet has consequences for the relationship between customers and businesses, and mobile communications accelerate this process. More than ever before, it is the customer who dictates the pace.
In a highly competitive environment, the retail industry must focus on strengthening its core competencies. Very little affects the customer relationship more strongly than an attractive, customer-specific offering and expert advice. This means digital services in the retail space can become an important success factor. The process of interaction with online channels also offers new and exciting opportunities for physical retailers.
To exploit this potential, the retail industry must reassess its strategies and adapt its business models accordingly.
In this study based on interviews with senior national and international retail executives, Kurt Salmon and the HDE examine the future role of the retail space in the e-commerce environment, identifying the key opportunities but also the challenges. Ultimately, physical retail stores are and remain vital places where communication with customers, experiences and emotions – in other words, where “trade” – actually take place.
To learn more, download the study here.
1 Mintel, 2014
2 IFH, 2014