The online shift caused by the corona crisis is being exaggerated, according to a report by GlobalData. Consumers still buy the most in the physical store, even during the lockdown. E-commerce needs the brick and mortar store very badly.
Physical stores will play a more important role
The popular assertions that e-commerce has now really broken through and that more online sales also means fewer physical stores are all too simplistic, says research agency GlobalData. On the contrary, the pandemic increases the links between online and physical channels and shows that retail is in fact one big market rather than separate channels. Even at the height of the corona crisis, physical stores continued to be important, thanks to rapid growth in click&collect, returns to the store or advice by appointment.
In fact, it looks like stores are set to become a more important part of the online ecosystem in the years to come. Neil Saunders, GlobalData’s lead retail analyst, explains: “Despite claims that the growth of online shopping is leading to a ‘retail apocalypse,’ the reality is that many retailers across all sectors are thriving because they are innovating with multichannel to provide a convenient shopping experience for consumers. A very significant proportion of sales that are attributed to the online channel are, in fact, multichannel sales that rely on both stores and online for success. On average, one third of ‘online’ non-food purchases – where a customer actually transacts online – are in fact reliant on physical stores for product selection, pick up, or return.”
The GlobalData survey, carried out in the US, UK, France and Germany, also shows that online penetration has already dropped by double digits everywhere since stores reopened. Also, even during the lockdown in France and Germany, e-commerce accounted for less than 20% of total retail sales. There was a clear increase, but not everyone apparently went online: people bought less – postponed their purchases – and still made their food purchases mainly in physical stores.
Online growth thanks to stores
So, despite the record profits of last quarter, Amazon has not yet won, not even in the US. Retail is one of the least consolidated sectors in the United States, as the five largest retailers only account for 19.9% of total sales. In other sectors this concentration is significantly higher, in Europe it’s even lower. It does, however, make retail a particularly competitive market, where a fierce battle for survival is raging. The reorganisations and bankruptcies of the last – and coming – months are not due to the online shift, but to mistakes and a lack of adaptability on the part of the retailers themselves, GlobalData says.
Those who do win are those who make multichannel investments. For example, during the corona quarter, construction giant Kingfisher experienced online growth of no less than 225%. What is striking, however, is that the chain sees the physical stores as important assets: “Close to our customers, they are in the right place to serve them both physically and digitally (as picking, collection and delivery hubs) – regardless of where the financial transaction takes place.”
Food retailers such as Sainsbury’s and Carrefour also saw unprecedented online growth, largely thanks to their click&collect capabilities. At Sainsbury’s, the physical supermarkets also helped sister chain Argos generate sales: as those non-food stores remained closed during the lockdown, more and more customers also picked up their non-food order from the supermarket. No matter how counterintuitive, GlobalData is convinced: physical stores with a multi-channel offer have accounted for a large part of e-commerce growth.
