Over the last ten years, evolving consumer habits, driven by technology changes, have altered the foundations of the retail industry. Retailers’ traditional focus on brick-and-mortar stores has taken a back seat to both online and mobile commerce. Web purchases are expected to account for over 13% of all UK retail sales in 2012¹ and, in the next ten years the UK could see online commerce account for one-third or more of overall retail sales.
What does this mean for traditional channels? The High Street may no longer drive sales like it used to, but it will continue to allow consumers to view, touch and interact with goods—even if they make purchases through alternative channels. While retailers accept the burgeoning influence of online, there is little doubt that there is not a one-size –fits-all solution to deliver sales and EBITDA growth. The strong Christmas trading of Next, House of Fraser and John Lewis demonstrates that their multi-channel offering is paying dividends, however, in contrast lower value retailers such as Poundland and 99p Stores have delivered consistent growth over the last few years by focussing on their store portfolios. Their business model is less suited to the online channel as a result of their high stock churn, relatively low average basket value and focus on spontaneous purchases best facilitated through the store format. The fast-growing “click-n-collect” hybrid channel, where consumers buy online and then collect from a pre-agreed store, is an example how retailers such as Debenhams are providing an omni-channel offering to consumers.
It is critical for retailers to understand how customers interact with their product offering and brand and adapt their strategy accordingly. Keeping strategies fluid and adaptable, whilst assessing and implementing only the relevant channel experiences, is the best way to stay ahead of the game and offer an attractive acquisition opportunity for financial investors or strategic purchasers.
1. Centre for Retail Research “Online Retailing: Britain and Europe 2012”