When will online shopping take over? This dire prediction has been looming since 2015 but the reality is quite different and retail still has an important role to fulfil.
While I am a hard-core Ecommerce enthusiast, I do not share the prediction of many industry experts who predict the imminent death of retail.
Retail desperately needs to reinvent itself. It’s been suffering from lazy business practices because business was too good for too long.
Like many industries it became complacent – often to the point where they realized that they were on fire when it was already too late.
Online shopping has so many benefits over retail and comparing the two side by side makes it seem like retail stands no chance.
Retail does have some benefits though and these are the ones it needs to build on if it is to survive long term.
I do not think that online shopping will take over – nor do I think it should. In short, it’s not good for the shopping ecosystem.
As more and more brands are starting to offer online shopping, commerce in general is becoming more decentralized.
Big retail and department stores with massive redundant overheads simply can not be sustained in a digital era.
But will online shopping take over regardless? I don’t think so. I think retail will evolve in time to find its new place in the digital era and regardless of the convenience and benefits of online shopping, retail has value beyond price and convenience.
The Facts About Online Shopping Versus Retail
There’s a lot of speculation and assumptions when it comes to online shopping and Ecommerce. Everybody seems to have a prediction and most of the time its based on hunches rather than facts.
Entrepreneurs often rely on hunches. It is how industries gets disrupted. It only takes one disruption to change an entire industry.
Just look at what Uber did to taxis and what AirBnB did to the hotel industry.
These disruptions happen very quickly and they usually blindside old and established ones.
There is likely to be some disruption in Commerce at some stage. I do not believe that Ecommerce was a disruption – at least not a big enough one to make traditional retail obsolete.
Will online shopping take over retail completely? It might but it will most likely be later rather than sooner.
Those who are predicting that retail is about to collapse completely are just not looking at the facts.
As someone who’s been working in Ecommerce for more than 10 years certainly have seen a big shift towards online sales. Do I want to see online shopping take over completely?
No! Definitely not. Ecommerce and ‘brick and mortar’ supplement each other and the symbiosis between the two is only just starting to develop.
According to Google, 63% of all shopping starts online. That does not mean that 63% of all transactions are online.
Many people search online and then go buy it in a shop. Many people go try it on in a shop and then go buy it online.
Different strokes for different folks.
Lets look at some of the facts about online shopping versus retail to draw some more enlightened conclusions about the future of retail and ecommerce.
- In 2020, Ecommerce sales account for about 21% of all retail sales
At just 21% of all retail sales this is still a number that is a long way off from online shopping taking over.
Given the fact that 2020 was the year of the toilet paper crises where people flocked to their phones to do their shopping, this number is slightly inflated.
In many ways COIVID ‘forced’ many people who were reluctant to buy online to do so. Will this trend continue? It most likely will as 2021 seems to be more of the same but what happens when the pandemic is under control remains to be seen.
- Traditional retail sales are growing at around 4% per year with Ecommerce are growing at roughly 15% per year average since 2015.
This 15% growth is a bit misleading because the growth has been on the increase year over year since 2015.
If this trend continues (which it most likely won’t) then we can expect Ecommerce to have a 100% share and a complete takeover of all retail by the year 3001. That is well beyond our lifetime.
I say it most likely won’t grow along this trajectory because I find it hard to fathom no new major technology in the next 20 to 50 years to change it all in the blink of an eye.
- 75 Percent of People Shop Online at Least Once a Month (Statista)
The convenience of online shopping has changed our lives dramatically for the better.
While many baby boomers are still reluctant to give their credit card details ‘to the internet’ younger generations have fully embraced ecommerce.
It is only a matter of time before this number creepos closer to 100%. Will online shopping take over because of this statistic?
No, it simply means that for some purchases, people are more comfortable buying online than for others.
I don’t have to think much about ordering our basic weekly groceries online. When I am looking for a new pair of running shoes however, the search intensifies and I am more likely to want to actually try on at least a dozen pairs of candidates.
Some industries and some products are more likely to gain a bigger share of the retail pie than others with online shopping.
This is a very important consideration when you are entering the market with a new product.
- Approximately 26% of the world population is shopping online
This is a staggering statistic give the fact that there are about 7.8 billion people in the world.
This is particularly interesting given the fact that online shopping is being embraced in the developing world.
Amazon is already making some serious inroads in countries like India with a billion more people than the USA in half the space).
- 57% of shoppers make purchases from overseas retailers.
This is perhaps one of the most important stats because it is what is starting to shrink the world and giving birth to a true international economy.
The fact that you can order products from the USA, China or wherever your card will be accepted is leading to a new type of competition.
Taxes, shipping rates and duties will become some of the most highly contested issues as it will largely be responsible for dictating prices and whether you can buy stuff cheaper from overseas than buying it locally.
- Nearly Half (49.2 percent) of E-Commerce Sales Are Made Through Mobile Devices in 2020 (Statista)
The thought of using your mobile phone for anything more than calls or text messages seemed unthinkable just 10 years ago.
The smartphones got browsers and using it for email and the internet became more common. Still, ecommerce was not big on phones until online stores became mobile friendly and 3G/4G technology became everyday.
With nearly 50% of all Ecommerce sales happening on phones, the conclusion leads us to understand that convenience is the key.
The faster and the more convenient it is the more likely people will use it.
Much of the focus of new technology on the Ecommerce space is aimed at streamlining purchases through mobile phone.
By integrating payments systems with the phones and making checkouts seamless it is likely to become an even bigger percentage in the near future.
Apps can use a lot of data points to not only personalize the shopping experience but offer many conveniences that make shopping from your phone even easier.
While this trend will continue, there certain is a lot of kickback regarding data usage and how intrusive these apps can be.
Why Retail is ‘Safe’ and What Online Shopping Can Not Replace
Online shopping will not take over – at least not in the next 50 years. I am fairly confident in that because there are many important benefits to traditional brick and mortar shops that simply can not be replaced.
The various lockdowns in countries all over the world during COVID made us understand more than ever the value of face-to-face humans interaction.
You can not go the pub on a Zoom call. You can try but it’s not much fun. The need for that energy and the dynamics of human interaction is built into us.
Here are some of the main reasons why I think retail is ‘safe’ and why it will continue to fulfill a need that can not be satisfied through online shopping.
This does not mean that I think retail will (or can) continue the way it is. It will naturally be forced to evolve and become more of what it needs to be in a digital age.
The Tactile Experience
How often have you ordered a piece of clothing online and when you open the parcel it just disappointed you.
The tactile experience of seeing and feeling something, trying it on and really seeing yourself in it BEFORE you buy it is still one of retail’s big win’s.
This will probably ensure that retail stores stick around for a long time still. While photograp[hs can show you a lot when shopping online, it certainly can not replace the tactile experience.
Many people turn to online shopping to compare prices and find the best deal. These people are ‘price shoppers’ and no matter what you do they will always be there.
They want the best deal they can possibly find and will spend hours and even days searching for the cheapest deal – even if it means waiting 7 weeks for a (hopefully not) fake from China.
There are also a lot of online shoppers who are not concerned about prices. They are more concerned about quality or getting it the same day or being able to exchange it locally etc.
Price shoppers can have a field day online. In fact, online shopping is their paradise. For everyone else, there’s the shopping mall.
Browsing and Exploring
Shopping is about more than just buying something. Yes, for some purchases its just about buying it but for anything of value, we like to ‘go shopping’.
The experience of browsing and the whole concept of retail therapy is about finding new stuff, seeing what looks good on you and actually seeing products.
It is part of the reason why shopping malls became successful and why many high streets used to flourish.
Yes, you can browse and explore online but its the act of being there and actually seeing and holding the products that really perks our interest.
Going shopping is almost always combined with some sort of social interaction. Apart from the interaction with shop assistants, grabbing a coffee or something to eat makes it an outing.
The social experience of shopping is very underrated. Shopping with friends or family is a bonding experience and is mostly fun.
Having a trusted opinion to help you make buying decisions or a voice of reason to talk you out of it makes for a whole different experience than just sitting on your sofa and hitting the Buy Now button.
Local is ‘Lekka’
Where I grew up in South Africa there was a saying ‘Local is Lekka’. The word lekka means ‘nice’ or ‘good’.
Local businesses make up an important part of communities. I’m not really talking about big department stores but more about the kind of stores that gives a community its flavour.
Many people make a point of supporting local businesses as way of supporting the community.
If there are no shops on the high street there will most likely be no restaurants or coffee shops.
This will suck the life right out of any community and we will end up with apocalyptic type cities where everything is reduced to a livable cubicle.
As long as there are communities, there will be trade and there will be retail.
Will Online Shopping Take Over From Retail Completely?
If we look at the statistics it does not look great for retail over the next 50 years. Like a boiling frog its been simmering – oblivious to the changing shopping environment.
Many retail stores have found new life in going online though. Those who rely solely on retail sales are the ones who are struggling.
Those who are adapting and starting to embrace the power of being in both spheres are starting to reap the benefits.
One thing is for sure. The traditional way of doing retail does not work. The overheads simply can not justify the business model.
Rent in shopping malls and even some high streets borders on extortion. I’ve seen some big brand shops locally posting losses year over year for the sake of having a presence and for ‘branding’ (these are local surf shops being close to an iconic surf beach).
This kind of thinking simply can not survive.
With traditional retail, there are no winners. Consumers are being charged a premium while the shops themselves are struggling to make ends meet.
My bold prediction is that retail will scale down significantly. Having acres of stock, an army of shop assistants and spending 60% of your revenue has to change – and it will.
I think that retail shops will become more like showrooms with minimal stock and and minimal staff.
These ‘showrooms’ will focus more on the shopping experience and the brand experience than on pushing sales.
This will move online anyway.
From this perspective online shopping will take over but it will rely heavily upon retail and the overall shopping experience.