Industry perspectives

2015 Retail Trends

E-commerce is capturing almost all the gains in retail sales. Should you care?

Since 2000, fully three-quarters of retail sales growth has occurred through online channels. That’s an eye-catching statistic, yet not quite the whole story. The online channel now accounts for about 8 percent of total retail sales. But three sectors have been largely untouched by e-commerce: cars, gasoline stations, and groceries. Because these categories are significant, responsible for almost half of total retail sales, online’s penetration of its “addressable market” — in other words, its available pool of revenue — is close to 16 percent. And it is expanding rapidly, at an annual pace of about 15 percent, well beyond the traditional retail, “GDP-like” growth rate.

Impressive, yes. But here’s the thing: We’re not sure it matters anymore.

Instead of sounding the death knell for bricks-and-mortar stores, the steady growth of online sales is breathing new life into the physical stores of some retailers. These companies understand that even as e-commerce thrives, it is becoming increasingly difficult to distinguish an online sale from an offline one. Consider these hypothetical scenarios:

The steady growth of online sales is breathing new life into physical stores.

  • A consumer browses Amazon’s website looking for a TV, relying heavily on user-generated reviews to make a choice. Checking prices elsewhere on the Web, he discovers that the model he wants is being deeply discounted at a local John Lewis in Aberdeen, United Kingdom. He completes the purchase at the store and carries the TV home.
  • A busy mom is shopping for holiday gifts. She makes her selection on the Toys ‘R’ Us website and chooses the layaway option at her nearby store in the Omaha, Neb., mall. She could afford to pay for it all at once, but it’s more convenient to have the retailer store the gifts until nearer the holiday — safely away from the prying eyes of her kids.
  • A student in New York City goes to Apple’s website to buy a computer. It is damaged in transit, so he returns it to the company’s physical store downtown.
  • A multitasking Parisian professional on her way home from work pulls into a suburban Carrefour hypermarket to pick up groceries, a few household items, and a birthday present for her nephew. Using the retailer’s app to find the best deals, she discovers that a particular toy is not available in store but can be purchased online. She buys the item from the app while still in the store and elects to have it shipped there for pickup over the weekend.
  • A shopper on Asos’s fashion apparel website finds a blouse she likes but is unsure of her size. She visits a local store that carries the same item to try it on. She completes her purchase there, but later decides she would also like the blouse in a different color. She goes to the store’s website to purchase the blouse and at the same time signs up for an annual membership for free two-day shipping on all future orders.

The ubiquitous consumer

Viewed broadly, these anecdotes depict various activities of today’s global consumers, who want to move easily across channels, have many retail and product options at their fingertips, and demand full visibility into inventory and pricing. Omnichannel shopping is here to stay, and we expect that over the next 12 months and the years to follow, it will evolve in unpredictable, organic ways as consumers increasingly create their own paths to purchase. In fact, as we see it, shoppers are moving so effortlessly among channels that it will soon become a futile exercise to pinpoint the share of online sales in total retail revenue; before long, that number may be of interest only to the accounting department, not to the retailer’s buyers, senior executives, and stockholders.

To win in this complex, shifting environment, global retailers should take three critical steps:

1. Invest in digital technologies with a clear understanding of how they can enhance the in-store experience. Some retailers know that today’s digital tools are restoring the lost art of personalized customer service. Supermarkets now have to compete with online subscription models, such as Amazon Mom and Target Subscriptions, which allow customers to conveniently stock up on recurring purchases while the retailer builds a loyal customer base. But the same principles can be applied in physical stores — in a way that encourages consumers browsing in person to “top off” their regular needs with a few high-end purchases. Here, retailers have the opportunity to partner with large brands; for example, the two organizations could combine purchasing and other transactional data to send tailored offers to customers on their smartphones based on their physical location within the store.

2. Offer a convenient one-stop-shopping experience that responds to the shoppers’ path to purchase. One-stop-shopping convenience is no longer about selling everything from a single supercenter or website. It’s more profitably targeted at giving the right omnichannel experience to shoppers who are budgeting for both time and money. That’s why department stores in the U.S. such as Macy’s and Nordstrom, and superstore Tesco in the U.K., among others, are offering services that combine their in-store and digital capabilities. For instance, many are turning stores into distribution centers, pickup sites, and return locations. Meanwhile, Amazon, the very model of e-commerce, will be opening its first physical store in the heart of New York City.

3. Rigorously examine resource allocation. As online sales grow, many retailers will be compelled to spend heavily on new digital capabilities, including website design and functionality, user-friendly interfaces, enhanced content, data collection and analytics, price modeling, and advanced customer communications. Perhaps less glamorous but no less critical, they must also invest in efficient and seamless logistical and inventory management. These types of new initiatives will increasingly become a strategic imperative. But if they occur while retailers simultaneously maintain the large fixed outlays to manage the traditional store network, the shift to omnichannel shopping may result in higher costs and falling net margins.

To avoid this outcome, retailers need to be unrelenting in identifying their strengths, weaknesses, and opportunities in their physical and online target markets to determine the capabilities that are critical to success in both and in the new retail landscape — and to pare back expenses in less valuable areas. For example, it’s critical for retailers to understand inventory flows through their disparate channels to avoid stranding inventory where it is not needed. Similarly, retailers must pinpoint the most important consumer needs to address: Should financial resources be directed at improving the in-store service desk or the website’s call center, or both?

The meaning has changed

Blurring today means consumers participating in different channels on the path to a purchase.

In the early 2000s, the phrase “channel blurring” was overused to describe the rise of new formats like supercenters and clubs that were invading the traditional, supermarket-dominated grocery market. But the blurring that’s happening today is not about “allocating” sales between different formats. Rather, it centers on encouraging consumers to participate in different channels sequentially and simultaneously along the path to a single purchase. This will become more and more common, even within retail categories ( that have until now been relatively isolated from e-commerce. An example is a new service piloted by General Motors to attract the vast majority of car buyers who research online before making their purchase in a dealership. Under the GM program, consumers can search, select, arrange financing, and purchase a car over the Internet — and have it delivered to their doorstep by a GM dealer.

The evidence from the data and anecdotes is simple: Consumers now have multiple touch points with brands (online, mobile, and in-store) and use all of them to inform their purchases. They don’t care to draw the dividing line — and neither should retailers.


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