Online retail is growing six times faster than high street sales and is predicted to exceed £37 billion by 2014, according to new research.
The Webloyalty Online Retail Report by Verdict Research predicts that current internet spending will grow by £14 billion (61%) from 2010 to 2014.
The rapid growth is being driven by shoppers heading online for convenience, and coincides with a predicted boom in the role of mobile phones in the shopping experience.
The report maps the future of the UK’s high streets, showing mobile retail as driving dramatic changes ahead.
More spend will continue to migrate online and the report predicts that physical retailers’ online sales will grow 69.8% compared to just 7.3% for sales from their stores between 2010 – 2014.
As a result, 40,000 stores have already abandoned the high street in the last decade and this trend is set to continue.
Many familiar brands will disappear from town centres as a growing number of retailers close shops and focus instead on booming online and mobile retail.
“We estimate online retail to exceed £37 billion by 2014, a rise of 61% from 2010. As a result, shoppers need to prepare for a radical change on their local high street. By 2014, we predict the high street will become less about shopping and more about the experience. Apple is ahead of the game, where their stores have already become a destination rather than a just a shop. You can look, touch and test the products, speak to experts and make your decision, but then buy online.
“The next step will be the use of mobile phones as part of the shopping experience. Soon, consumers won’t think about hitting the high street without their smartphone. It will be absolutely essential – not only to browse, but for how we pay, locate products and find the best deals and discounts,” says Neil Saunders, Verdict Research.
The role of mobile phones in the way we shop is expected to alter significantly. Just over half (52%) of UK consumers currently use their mobiles during the purchasing process, but in the next five years this is expected to hit 80%.
“Shoppers after a better deal will use their mobile to compare and find prices. Retailers that survive on the high street will be those that combine their online stores with mobile apps that offer shoppers a better deal using location-based offers. Almost half of all Brits own a smart phone – which will be how shoppers locate and compare the best prices in the very near future,” says Neil Saunders.
The Webloyalty Online Retail Report by Verdict Research has analysed the development of different retail sectors and predicts some of the most significant changes in the technology arena.
40% of electricals and 80% of music, films and games will be bought online by 2014, which will render many more retail spaces as redundant, the study found.
“Shoppers are beginning to find it increasingly difficult to find their favourite CD, film or book on the high street. HMV have announced the closure of 40 HMV and 20 Waterstones stores this year – where their shops have become nothing more than costly overheads. Shoppers are still buying entertainment, but are looking for better deals online – and this will soon be done on smartphones whilst on the go,” says Neil Saunders.
This move away from the high street is also reflected by the continued growth of out-of-town shopping centres, where rents remain cheaper than in city centres. Out of town retail space grew 34% from 2000 – 2009, while high street space shrank by 8.9%.
In the early ‘90s around three quarters of all retail spend in physical stores took place on the high street, by 2010 this had dropped to 47.3%, by 2014 the report predicts this will have dropped to 40.2%.
For shoppers, this means they will have no choice but to leave the high-street for out of town store locations, or head online.
“Mothercare is an example of a retailer who is taking up retail space in retail parks away from the high street where overheads are cheaper. Landlords on the high street will not be able to compete. We have already seen JD Sports negotiating cheaper high street rents amid difficult sales conditions. The competition might make the high street more attractive once again to smaller boutique or local retailers. This could spell the imminent death of ‘clone town Britain’,” says Mr Saunders.
One of the benefits of retailers opening fewer new stores in the future is that their existing space will become more efficient. The report predicts sales densities to increase 8.7% to £514 per sq ft between 2010 and 2014.
Martin Child, Managing Director, Europe of Webloyalty adds, “The Webloyalty Online Retail Trends report paints a clear picture of the shopping experience of the future. Shoppers will be able to find the best deal – either online or using their mobile – and the onus is now on retailers to rethink their high street presence in order to remain competitive.
“Technology can improve the way customers interact in store. For instance, customers can ‘check in’ with their mobile phones upon entering a store to receive on the spot discounts. But retailers can’t just rely on foot-fall anymore – online is crucial for today’s success. Mobile is the secret for tomorrow.”
A PREVIEW OF THE STORE OF THE FUTURE:
Bulleted points from the report that describe the consumer experience and expectations of 2014… and beyond.
•Shoppers will use their mobiles to both compare brands and prices, and buy. High street stores will need to become connected, with free WiFi services helping shoppers connect with and compare brands. Retailers will need to offer location based discounts to smartphones and the ability to purchase on the spot ‘online’ via a mobile after comparing prices.
•Staff should be able to roam the store with mobile point of sale technology – meaning the end of lining up in front of a till.
•High street stores will need to compete to become a destination. As larger retailers move out of town or online, the high street will be populated with boutique ‘experience’ stores, coffee shops and restaurants.
•As high-street retail space shrinks, ‘click and collect’ will become more popular, as retailers want to use their floor-space more efficiently and cut overheads.
•The high street’s demise requires flexibility in formats. Retailers with a physical store presence will need to adapt formats regionally and locally to cater for consumers’ changing shopping patterns.
•Retailers need to ensure the messages sent through various channels are consistent. A clear brand image should be portrayed across all communications.
•It becomes vital to add value to the shopping experience to remain relevant in a multichannel world. Retailers will need to turn them into brand destinations, which offer a highly immersive and interactive shopping experience. Focus on customer service to disseminate information and provide collection points for customers’ convenience.
•Retailers need to ensure they offer multiple fulfilment options. Retailers can no longer run their physical stores and online operations as separate functions. Consumers will expect a fully integrated service from retailers with the ability to order online and pick up in store or order in store for home delivery.
•Don’t miss the link. Mobile will be the channel that links all parts of a retailer’s multichannel operation. Retailers will have to work hard to make sure their ‘online shopping carts’ function across multiple channels allowing customers to for example add to ‘wish lists’ or order items through scanning bar codes when in stores.
The complete report can be downloaded here.
www.webloyalty.co.uk
