Christmas brought a continued acceleration of online migration: not perhaps an inflection point, but certainly a quickening of pace.

Each year, the fourth quarter is the one which signals the step forward in digital behaviour – important because it sets the high water mark for the year to come.

Services such as click-and-collect are growing in popularity

New Look, click-and-collect

Services such as click-and-collect are growing in popularity

In the fourth quarter of 2015 the British Retail Consortium’s monitor showed non-food online penetration advancing to 20.4%, up two percentage points over 2014. ONS data also shows a record online surge.

A number of factors stoked this, important among which were growth in click-and-collect, greater confidence about using that channel closer to Christmas Day, and the online growth of Black Friday and Cyber Monday.

Hitwise reports that mobile devices accounted for 49% of total visits to retailers. For non-food, that number was ahead of 50% for the first time.

While e- and m-commerce continue to set new records each year, in some ways it no longer matters.

Propositionally and organisationally, smart retailers have moved beyond ‘digitally enabled’ or even ‘digital first’ to ‘customer first’.

They no longer speak channel. But operationally and economically it matters a lot, both to individual retailers and to the economy as a whole.

Productivity impact

Despite the digital revolution, the overall productivity of the retail sector –measured by revenue per labour hour) seems to have stalled since 2009.

This is partly because online retailing can actually reduce productivity – especially where retailers are stacking shelves only to pick from them again for customer orders.

Capacity utilisation and capital efficiency of the industry are also falling. In the absence of spending growth (which of course is because we now spend only 30% of our income on goods, the rest is on services), retailers’ offline channels are seeing 2% or 3% annual decline.

But space reduction has been modest while discounters are adding it. Meanwhile capacity and capital have ballooned in online channels.

As the economist Robert Solov quipped: “You can see the computer age everywhere but in the productivity statistics”. This is nowhere more true than in retail.

Innovation slowdown

Indeed, there have been few major innovations in retail productivity since the launch of ‘big-box’ retailers, the development of the barcode, and the shift from cash to cards.

“A new wave of technologies could power a new age of productivity growth, but we have yet to see it”

Michael Jary, OC&C Strategy Consultants

These helped to transform supply chains during the 1980s and 1990s, and to drive the shift away from small-scale retailing.

But by the end of the last millennium, these productivity-enhancing gains were mostly played out.

A new wave of technologies including not only ecommerce but also cloud computing, robotics and artificial intelligence could power a new age of productivity growth, but we have yet to see it.

This could be because we are in a transitional phase where traditional retailers have not yet faced into the degree of capacity retirement that will be forced upon them.

Or, it could be that while the customer enjoys the benefits, the industry’s gains from technology are illusory.

  • Michael Jary, partner, OC&C Strategy Consultants