Market

Online First Retail – Everyone Is Doing It

The other day, I was looking for 3 juggling balls to buy. Why? That’s a story for another day, but I thought to myself, where should I go to find juggling balls in Pittsburgh, Pennsylvania. Walmart
WMT
, Dick’s Sporting Goods
DKS
, etc.?

You might be reading this and saying to yourself it seems so obvious, just jump on the web and order it online. I could even choose when and where to have it delivered. Perhaps, even within a few hours. All of that at the lowest price, highest quality, best peer review and after viewing videos of “expert” jugglers who suggest what they like…and on and on and on.

I challenge anyone reading this to find me a person (ok, maybe more than just 1 or 2) that doesn’t first look online before buying something they want or need.

If the search helps you to find it locally, well then that’s probably a nice benefit if you feel like driving over and picking it up. But chances are you’ll find it on a website and have it shipped within a day or two. It’s just the way it is.

This is because while we may have been tiptoeing in this direction for years, a recent confluence of events, like a global pandemic, truly catapulted retail toward this online first, in-store second world even faster than many had anticipated. I found research by Digital Commerce 360 in January that said consumers spent $861.12 billion online with U.S. merchants in 2020, up 44 percent compared to the year prior — the highest annual U.S. ecommerce growth in at least two decades.

Online’s share of total retail sales has been growing, too, with ecommerce penetration hitting 21.3 percent in 2020, up from 15.8 percent in 2019 and 14.3 percent in 2018. This gain in ecommerce penetration is the largest year-over-year jump for U.S. retail sales on record. By category the percent online is much, much higher.

Even before the pandemic, research predicted online to be 90 percent of all shopping by 2040, but I believe we are going to get to this number a lot sooner and here’s why:

Growth of Online Marketplaces

Online marketplaces like Amazon
AMZN
, Facebook Marketplace, Walmart, Shoprunner and even Etsy offer the new product and brand discovery shoppers used to get in department stores, but it’s more convenient, and easier than shopping on multiple ecommerce websites. The best of them leverage consumer data to customize content. Consumers who discover products on marketplaces have online experiences which meet their expectations in terms of discovery and shipping. At the same time, it’s also easy for new or emerging retailers and brands to leverage a marketplace to grow their digital presence through online discovery, without having to create a back-end infrastructure for sales.

In 2019, according to Digital Commerce 360’s analysis the top 100 online marketplaces in the world sold $2.03 trillion and accounted for 57 percent of global web sales. In its preliminary 2020 estimates, Digital Commerce 360 projected that marketplace gross merchandise sales would grow 40 percent year-over-year. Retailers and brands are catching on. I read that so far this year 242,000 sellers joined Amazon’s marketplaces. I think this is going to increase exponentially in 2021 and beyond – we are truly just getting started here.

Boomers Like Online Shopping

As part of researching on the pandemic’s impact on retail, First Insight has been surveying consumers for nearly a year. What they have seen is a significant shift in behavior of Baby Boomers who are clearly more adept at online shopping now than they were before the pandemic. When the pandemic ends, these once loyal in-store shoppers (and backbone to in-store retail) will probably continue to prefer the convenience of online shopping, and our research shows that a great many will continue to use it even after they are vaccinated.

For example, 86 percent of Baby Boomers said they will spend more or the same shopping online the first half of this year, which is actually the highest percentage across generations, with 82 percent of both Gen X and Millennials, and 76 percent of Generation Z saying the same. By comparison, more than half of Baby Boomers (56 percent) say they plan to spend less shopping in-store the first half of the year, which is roughly the same as other generations.

However, even after being vaccinated, Baby Boomers are the least likely to go in-store more often than other generations. Fifty-four percent of Baby Boomers said they will shop the same or less in-store compared to Gen X (39 percent), Millennials (44 percent) and Gen Z (40 percent). When it comes to department stores, 42 percent of Baby Boomers said they would go as much or less after being vaccinated, similar to Gen X (43 percent) and Gen Z (42 percent), with 48 percent of Millennials saying the same.

The Distribution Chain is More Agile, and Faster

The pandemic disrupted the global supply chain and unearthed significant inefficiencies and gaps which forced retailers and brands to find ways to be more agile. Omnichannel, once a nice catchphrase, became a critical component to serving the needs of consumers who were no longer shopping online only for convenience, but also necessity. Retailers were forced to innovate, and find new ways to reshape and streamline their distribution chains to more easily and quickly source and distribute products, giving birth to new models like shipping directly from a manufacturer to a consumer. This has also created a new model in retail called Consumer-to-Manufacturer (C2M), which I’ve written about in previous articles.

To compete with emerging models like C2M, retailers have also been examining how best to bring their supply closer to the demand signal to be able to adapt to changing needs and expectations by consumers on the products and styles they sell.

It has also forced retailers and brands to think about adoption of next-generation technology platforms that enable them to design and test new products with confidence. Whether it is asking consumers about their preferences through Voice of Consumer analytics, or digitizing product line reviews using Zoom rather than sending samples and designs back and forth for weeks, the supply chain is shortening making it even faster for a consumer to find what they want, and the price they expect, online.

Online is Where the Consumer Is

The number one rule in retail is to go where the consumer is. That used to be on main street, then it was in malls and department stores. Now it’s online. And offering personalized services, whether it’s presenting items that a consumer wants and needs, or promotions and experiences that keep consumers coming back — like I mentioned with Chewy in my recent article.

I do not see consumers putting down their phones anytime soon to pursue a wild goose chase of finding what they need and want in-stores. There will certainly be exceptions, particularly when it comes to younger generations who have the time and interest in looking for experiences in-store even more than products. It is undeniable that the world is now more than waist-deep (and maybe, neck-deep) in an online-first world, where personalized products, pricing, convenience and experiences must be waiting for every consumer when they shop online. Game plan? Understand the customer by listening more, then serve them what they want.

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