In this article we will look at the staggering growth online retailers are getting, how the high street is suffering and how it will only get worse for bricks and mortar.
Festive sales for 2016 showed signs of strength and growth, with the jump in online market growth reported to be 7%!
However it’s not the greatest of times for high street retailers.
Next issues a profit warning and expects a 5% increase in costs
John Lewis cuts its famous staff bonus to reinvest online
Marks & Spencers announces the closure of around 30 stores
Debenhams & House of Fraser receive a boost in sales…. But admit sales have been driven online and brick and mortar is down
Internet retail giants ASOS and BooHoo report sales increases of 30% and 55% respectively
This has all happened in the last few months and experts expect it to get worse across 2017 as the effects of Brexit, Rents and business rates cut into margins generated at brick and mortar stores.
On the positive side, eCommerce sales grew in 2016, up by some 7% with a reported $92billion spent in November and December alone. This growth is driven by mobile.
Retailers have found that their sales have not only been driven by online, but a decrease in shop footfall and an increase in mobile sales has shown retailers that people shunned the high street in 2016 and instead opted to buy online from the comfort of their sofa or bed at a convenient time for them.
Infact, sales were up between the hours of 10pm and 1am! Reinforcing the benefit of having an online store and being open for business 24/7!
The big names are catching on, John Lewis in particular who reportedly slashed its generous staff Christmas bonus to focus on reinvesting in its eCommerce and Mobile platform.
Retail giants and gurus are expecting high rents, the falling pound and an increase in business rates to be passed on to consumers in 2017. One report warns that we could see retailers pulling out of small towns and only stores opening in the bigger cities where the footfall and sales are stronger.
The retail giants have failed to adapt and adopt to not only the huge growth in eCommerce and mobile usage but consumer trends. ASOS and BooHoo have nailed this perfectly.
Firstly their model is based on lower costs from the start: no physical stores, no high street rents to pay giving no extra costs that have to be passed onto the consumer and in turn allowing them to take advantage of lower pricing.
Next have already issued a profit warning and expect to have to pass on a reported 5% cost increase to consumers next year due to the falling pound, whilst some retailers such as Primark have stated that they will take the increase their self in order to keep their costs low for consumers.
So how is and can bricks and mortar compete with online?
Bricks and mortar stores are already trying to counter the threat of online by enhancing their in-store offering. We are seeing stores such as Sainsbury’s are adding Argos click and collect features, Marks & Spencers are adding cafes and we are seeing retail stores head towards a more leisurely experience with aim being to keep people in store longer as reports have shown a correlation between an increased time spent in store and an uplift in sales.
Retailers also need to make massive progress and understand the digital marketing activities played out by giants such as Amazon, BooHoo and ASOS – the latter 2 who use social media to drive sales from their mainly younger audience.
What’s scary about these numbers is that this article and most data available only takes into account companies who are making their data public, there are tens of thousands of independent high street retailers who are facing a very difficult 2017, the majority of them suffering from a decline in local footfall, low online prices and the inability to compete financially with the big companies who can throw millions of pounds annual at design, development and digital marketing.
Are you an independent retailer? Share your thoughts below and join in the discussion.