Monday, 6 January 2014

ECommerce, Retailers and the need to focus online.



Interesting retail data from The Financial Times.

Best Buy, an electronics chain, saw a 15% rise in online sales in Q4 to 499m usd. Home Depot, the DIY stores, online rose by 50% to 600m. Walmart online sales expected at 13 billion for 2014.

Very strong rates of growth but ecommerce is still low in their overall sales. Only 6% at Best Buy, 3% at Home Depot and less than 3% at Walmart. Whereas generally, online now accounts for an average of about 11% of all retail sales.

Consequently in fact, these traditional 'bricks and mortar' retailers have a lot of catching up to do. In particular, they need to win against pure online retailers (such as Amazon) who are offering better shipping times and better customer service. Amazon will do 75 billion online this year.

The view is to be able to offer both experiences (online and offline) is the ideal notably at stores (like Home Depot) where customers feel they need to have the advice of a sales person. Indeed, 'click and collect' is seen as a classic example as to how to compete with Amazon's same-day delivery.

I'm not sure they're right.

Online is the new way to shop and will eventually overtake bricks + mortar. Consequently, these retailers need to focus on their online shops and start thinking like tech companies, not as pure retailers.

Online is cheaper to provide (fewer staff, no high street rents/overheads) and it's better margin being direct. It's also global so provides the opportunity to sell into a new customer base, previously limited by store location. 

Online media is also cheaper, targeted and more effective in promoting online shopping and reduces the big advertising overhead that these large retailers hold. 

The switch from high street shopping to online is now well upon us and growing fast. That means that new retail ventures are starting online every day and chipping away at traditional customers of the large retailers. It has to be the focus now, instead of shops. And not a bit of both.

It's what the customer wants.