The unprecedented, pandemic-induced shift to online shopping has dominated industry discussions over the past 18 months - and rightfully so.
According to the Office for National Statistics, it took seven years for ecommerce as a percentage of total UK retail sales to go from 9% to 19% (2012-2019). In the first four months of 2020, it jumped from 19% to 33%.
But where are we now? As Covid restrictions have eased, the demand for online shopping has naturally subsided. Ecommerce penetration has settled in the 27% to 28% range in recent months and, barring any other unforeseen disruption, I don’t expect that figure to materially rise over the next few years. Covid has propelled us towards a more digital world - but bricks and mortar retail isn’t going anywhere.
If you don’t believe me, just ask Amazon. Its appetite for physical retail continues to grow, with several notable bricks and mortar launches in the UK this year: Amazon Fresh checkout-free convenience stores, a hair salon (ahem, laboratory) and, most recently, its 4-star store in Bluewater.
Amazon revolutionised online shopping through fast and free delivery, one-click checkout, and user-generated ratings and reviews. It now wants to replicate that in a physical setting in an attempt to stealthily bait shoppers into its broader ecosystem.
At the height of the pandemic, retailers pivoted like never before. In the US, Walmart launched curbside pickup in just six days, while Aldi - a retailer whose business model is inherently incompatible with home delivery - rolled out click and collect to hundreds of UK stores.
Retailers were forced to divert shoppers to their least profitable channel but, in doing so, realised the critical role that stores can play in facilitating online purchases. I have said on many occasions now that I believe the future of e-commerce is stores. Retailers must leverage their physical infrastructure to provide customers with additional choice - not to mention the more favourable economics - when it comes to collection and returns, while also catering to the burgeoning demand for rapid delivery. The role of the store is no longer purely about selling. The pandemic has cemented its role as a hub for fulfilment.
Lessons of Retail Week Live
Look at Wickes for example. We learned at last week’s Retail Week Live conference that two-thirds of its sales come from ecommerce, but 98% of those orders are fulfilled in-store.
Next, meanwhile, was one of the first high street retailers to embrace the idea of the store as a fulfilment hub. Without mincing words, Next believes that stores are facing a “fundamental and irreversible disadvantage” to online, and like-for-like sales declines will remain the new normal (and that’s ok because stores are no longer just about shifting product).
Retailers are also recognising the importance of collaboration. By the end of November 2021, Tesco will have installed InPost lockers at up to 500 of its biggest stores, allowing shoppers to collect and return online orders across a multitude of retailers.
However, as yet another new normal sets in, we are seeing some retailers pivot once again to reflect shifting consumer demand.
Quite the opposite. The past 18 months have taught shown the importance of agility, failing fast and being responsive to change. We can expect to see more retailers scale back and reallocate resources where necessary, as the pandemic dust continues to settle.
But one thing is clear - there will be no return to the status quo. Contrary to popular belief, stores are a retailer’s best assets. Now is the time to reimagine bricks and mortar shopping for the post-pandemic digital age.