The Essence of Digital

How e-commerce is transforming not only the way we shop but the way we run our lives

Type in a search for ‘e-commerce’ and the definition is fairly universal “e-commerce: commercial transactions conducted electronically on the Internet”. Seems pretty simple and straightforward, yet behind this there is a multitude of implications for retailers and consumers alike which are transforming not only the way that we shop but the very nature of the way we run our lives. The digital revolution is of course well and truly upon us, shaping our lives in ways in which we never dreamt possible (think augmented reality, virtual mirrors, Amazon dash buttons, even Uber) and the exciting part is that this is just the beginning.

So before we consider how e-commerce impacts us today, it is worth a reminder of where it has come from. Take a look at what the Apple website looked like in 1996:

Apple

Clearly, in the ensuing 20 years much has changed. Consider the online experience in those days; no tablet, no smartphone, no broadband. Instead a desktop and a dial-up (for those of us old enough to remember that annoying tone) with patchy connectivity and glacial download speed – and of course, most of us had a phone which made calls and sent texts – perhaps typically a Nokia 6000 series. And we thought it was cutting edge – although the battery did last for days and not hours! So, from humble beginnings e-commerce has come a long way; today it proliferates our lives in ways in which we never dreamt possible. And in this context the UK market is often the focus of attention from the rest of the world so what is the significance of the UK?

UK retailing has the highest proportion of online retail sales, primarily driven by 3 factors: 1) smartphone penetration 2) wifi / broadband coverage and 3) geography – making home delivery accessible. Today online accounts for 13.4% of total UK retail spending (as opposed to 12.4% in the same period in 2015*). The Centre for Retail Research paints rather an apocalyptic scenario for the UK High Street where the share of online sales will account for 21.5% of all retail spend by 2018 resulting in:

  • Total store numbers falling by 22%, from 281,930 today to 220,000 in 2018.
  • Job losses could be around 316,000 compared to today
  • There will be a further 164 major or medium-sized companies going into administration, involving the loss of 22,600 stores and 140,000 employees. Many of these companies will survive but at the cost of closing more than half their stores.

That all adds up to a period of dramatic change for UK retail where the flexibility, ease, convenience and options e-commerce provides, is completely reinventing the way in which we shop. According to the IMRG, sales via smartphone and tablets in the year to April 2016 grew by 29.4% meaning that virtually all growth in e-commerce sales is now coming from mobile. A sharp reminder to all those retailers who haven’t yet optimised their sites for mobile that in 2016, this represents our preferred method of shopping. According to some sources, retail sales via mobile devices will reach 50% share by 2020. This might be a little far-fetched however it serves to indicate where retailers should be paying attention and making their investments.

Somewhat perversely, it is those retailers who manage to combine both online and in-store in one seamless experience who will survive as opposed to simply focusing on online alone. And this is the key to succeeding in today’s brutally competitive retail marketplace: understanding how online and stores interact and that each are part of a whole as opposed to representing different channels. John Lewis were one of the first to recognise this and invested heavily in supply chain in order to meet the consumer demand from online. In its 2016 annual report, whilst sales for John Lewis grew +4.4%, sales from online grew by 17%. A trend echoed across the industry.

The growth of e-commerce, particularly mobile, will continue unabated; where it finds its natural level as compared to in-store sales is difficult to predict, if only because as channels become more and more blurred, many retailers are still grappling with how to account for online sales – to the store in the case of click and collect or to the online website. However, one thing is certain; those who manage to deliver one seamless, integrated, convenient, easy to use, engaged and above all inspiring experience will succeed. In today’s retail world, the term ‘digital’ is often used and has become very much a mantra for many, nowhere is it more relevant than e-commerce – the essence of digital.

*source: Office for National Statistics April 2016 Report

Andrew Busby is Retail Business Head at Zensar Technologies

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