Online shopping is set to account for more than half of retail sales in the next 10 years, a new report suggests.
Some 53% of retail sales will be made over the internet by 2028, the report, The Digital Tipping Point, suggests. The Retail Economics report, commissioned by law firm Womble Bond Dickinson, questioned 2,000 UK adults, and points to three key trends that will drive this growth: digital natives, convenient delivery, and the continued closure of retail stores.
Younger shoppers buy online more often – and as time goes on their spending will account for a greater share of total sales. Currently, found the report, 62% of Generation Z shoppers, aged between 16 and 24, shop online at least once a fortnight. That contrasts with the 29% of those aged 65 or older who do so. Millennials spend 22.1% of their retail spending online, at an average of £42.32 per transaction, and £110.45 over the course of the month. Smartphones influence 53% of Generation Z consumers by raising awareness of new retailers and brands, compared with 3% of those aged 65 or older. However this group of shoppers does more of its spending on the high street and in shopping centres.
Shoppers, found the research, said that they would buy more online if delivery was cheaper (47%), faster (26%) and if returns were easier. Easier returns are also important for Gen Z (28%) and Millennials (30%).
The Retail Economics research suggests that in-home deliveries while customers are out are expected to grow. Emerging delivery-based business models include subscriptions and auto-replenishments, repeat sales which start online. The repeated sales are likely to boost the online share of retail transactions.
More stores have closed than opened for the last five years in the UK, and the continued decline in footfall means that trend is likely o continue. The study found that 10% of shoppers said they would shop less in physical stores in the next 12 months. That’s more than the percentage that said they would shop more often in-store. At the same time, retail property demand is at its lowest since 2007, says Retail Economics, with demand for flagship ‘destination’ stores that continue to attract visitors, while other secondary locations are under pressures.
Attitudes to data
A significant number of respondents to the research felt it necessary to protect their personal data. More than a quarter of respondents said they had taken action to limit the amount of data shared with companies, rising to almost a third for those aged between 16 and 24.
Consumer attitudes showed they believed businesses benefitted more than consumers, with two-thirds believing that companies benefited more than they did, while 8% thought consumers were the bigggest gainers. Just over a quarter (26%) thought there was an equal exchange of value. Asked what they would like in exchange for their data, respondents cited financial rewards, free and discounted products.
Retail Economics’ Richard Lim said: “It’s no exaggeration to say that the retail industry is undergoing a period of unprecedented change. Despite concurrent waves of political and economic upheaval in our midst, our work with retailers suggest this is a mere distraction from the seismic structural shifts reshaping the retail landscape.
“Successful retailers have always had to reinvent themselves to stay relevant. However, the pace of change will inevitably prove too fast for many – as shown by the number of CVAs hitting the headlines. While the impact of future technologies and consumer acceptance is highly uncertain, it definitely feels like the digital retail-revolution is only just getting started.”
Gavin Matthews, head of retail at Womble Bond Dickinson said: “Online retail is being driven on apace due to a combination of factors and early adopters in the retail market who can flex and adapt their business models quickly will rise to the top. However, as retailers leverage new technologies to support this growth, new risks also emerge. Consumers are increasingly conscious of the need to protect personal data and their privacy in order to reduce the risk of fraud, identity theft and misuse of their data. Real damage can be done to a retailer’s brand and reputation with any data breach and loss of trust can have far reaching consequences for any business and its bottom line.”