E-tail to take over from retail in 2020?
Retail stores in the UK have been warned by retail research firm Verdict that the internet will rule the retail world by 2020, and those without a strong web-based presence may face the dangerof being largely ignored by consumers.
According to eBay's latest Online Business Index, despite a tough year in 2009, the majority of internet retailers have experienced an increase in sales and profits while expanding their business. However, 79% of those with bricks and mortar businesses claim they could not have kept their high street presence alive without being online at the same time.
The pressure on bricks-and-mortar businesses is set to intensify, as 2020 is forecast to be the 'tipping point' after which online sales of categories such as electricals and books will exceed offline sales (for example, the ratio of online to offline turnover for electrical goods is forecast as 10:9.2 in 2020).
While British shoppers currently spend only 1 in every 13 online, that figure is expected to reach 1 in 5 over the next decade. Sales of items that were historically bought on the high street (so that consumers could sample them first) are also expected to see growth, with online apparel and footwear sales increasing by 351%, followed by health and beauty products at 330%.
eBay also predicts that, by 2020, online sales will account for more than 50% of all new retail businesses, compared to approximately 25% today, with over 280,000 internet start-ups being established. Online retail expenditure will also increase by a predicted 46 billion (up 223%) by 2020, while offline spending is expected to drop by 18 billion (down 7%) in the same period.
According to Mark Lewis, managing director for eBay in the UK, "To ensure businesses continue to thrive on the high street, they must raise their game and exploit new sales channels. The internet can provide a lifeline to all businesses, connecting them to customers across the globe."
However, the rise of internet-based retail would call for several improvements in the nation's infrastructure, with the most urgent changes demanded by online businesses being:
- Enhanced postal and delivery services (42%);
- Simplified rules on consumer protection (36%);
- Lower taxes for all businesses (53%);
- Investment in faster broadband (18%);
- Universal broadband access (13%).
Neil Saunders of Verdict concluded: "Traditional bricks-and-mortar shops cannot afford to ignore the potential growth opportunities available online. Consumers are increasingly demanding a wider choice of products at competitive prices, alongside improved customer service levels. With the 2020 tipping point approaching, these businesses should be looking to the internet to meet their customers' needs."