We see many headlines and articles about the incredible percentage growth of e-commerce and can easily get caught up into a false scenario regarding the long run implicatons. It is a fact that e-commerce is a growing and must be a dynamic part to any retail strategy. However, looking at the past percentage increases in e-commerce retailing and extrapolating that there will be a physical store “Apocalypse” or even that a majority of retail sales will be on-line is just plain wrong.
The bar graphs in the chart below from E-marketer projects a constant upward growth of e-commerce. It would be easy to conclude that this upward path of growth will come from cannibalizing physical store volume to the ultimate demise of brick-and-mortar stores. Accepting this incorrect premise can result in an inappropriate allocation of company resources.
The more important observation is that the percentage growth of e-commerce as shown by the red line is declining every year. [2020, this was an aberration due to the Covid 19 pandemic] This has the impact of flattening the blue line which represents the total penetration of e-commerce sales. The conclusion is that while e-commerce will continue to represent a significant portion of total retail sales, the physical store will still be the dominate format for most retail categories of business.
The other important thing to understand is that the online and off-line business will become so interconnected that it will be very difficult to delineate where one ends and other starts. The winning retailers will be those who make this line permeable and allow the customers full accessibility to all the retailer’s products, services and resources. In other words, the comparison between e-commerce and the physical store will become somewhat a mute issue.
Customers will buy online and off-line where they have trust. That trust is easier for the omni-channel retailer to establish due to it’s physical presences in the marketplace. The complete integration of the digital marketing program into the merchandising program of the physical store is a winning trust building strategy. This is illustrated by a recent survey by Morning Consult, Most Trusted Brands 2021 which showed the preponderance of multi-channel retailers when rated for trust:
Top 12 most trusted brands in Morning Consult’s “Why Brand Trust Matters”
It is the pure e-commerce retailer that is at a disadvantage and in danger of an apocalypse. the CEO of clothing retailer Everyone is quoted as saying, “The worst kept secret is online-only is not profitable at scale. [Retailers] need places to distribute, places to encourage cheaper returns and places to sell and drive brand recognition. The eyeballs [in store] are cheaper than trying to find them online. [Consumers] walking past [the store] in a mall can be more valuable to some brands.”