Trillion dollar shift

How big is the global shift to online sales? Picture the entire annual sales for retail in Australia in 2012.

Then quadruple that figure. For this year, you can quintuple it.Citi’s Global E-Commerce Retail Outlook has just come across my desk, and the figures are fascinating.

Citi quotes a recent report by eMarketer, which states that global e-commerce sales in 2012 grew 21.1 per cent to top $1 trillion for the first time. For 2013, worldwide online revenues are tipped to be up 18.3 per cent to $1.3 trillion. Big business.

This is more than a “structural shift”, which is the current buzz phrase. It is a seismic shift and I think we are only just starting to grasp the scale of the change.

As the Citi document says; “Consumers will continue to shift spending from bricks and mortar retailers towards omni-channel options, driven by lower prices, greater convenience, broader selection, availability of product, and more robust and accessible product information… the transparency of pricing that the internet brings has truly transformed shopping forever”.

And no category will be left behind. Citi says that grocery remains “untapped… but (this) will also change over the next few years.”

In the US, 7.3 per cent of furniture and home furnishings will be sold online this year.

Once upon a time, we would have said that could never happen.

Online is now where shopping mostly starts and often finishes (with a physical store usually sandwiched in between).

Eighty one per cent of US consumers cited the importance of the internet when purchasing electronics, according to Citi, which you might expect.

But 60 per cent of US shoppers believe that the web is critical for information on hair care.The net is a trusted source of information.

Citi points to Nielsen’s just released Global Trust in Advertising Report, which says that 70 per cent of consumers trust online consumer reviews, up 15 per cent in four years.

And the revolution is still mobilising. Worldwide smartphone shipments were up 59 per cent in 2013 and will grow 20 to 25 per cent annually for the next couple of years.

Right now, 76 per cent of US smartphone owners use their mobile device while shopping.

Now, what this doesn’t mean is the death of physical retail.

As I wrote in my last article, bricks can definitely beat clicks. But it does represent a re-shaping of retail, where possibly a quarter of sales (perhaps more) will be completed online.J

John Lewis in the UK already reportedly does 25 per cent of its business via the internet, and Neiman Marcus in the US makes 20 per cent of sales online.

The Citi study forecasts more generally that “e-commerce sales could grow to 20 per cent of total sales in the US”.

Time-honoured terms of reference will also need to change – for example, rents will ultimately have to be based on traffic, rather than sales, because stores will be used to inspire customers, but not always convert them then and there.

We need to realise that most shopping journeys already start with a Google search; that shoppers are going to use their smartphones in your shop as a research tool whether you like it or not; that the internet has re-framed customer’s expectations of what you should be able to deliver; and that more and more, the cash register will ring online rather than at the traditional point of sale.


The best retailers have already flipped their thinking, offering to match online retailers’ prices (Target US); building a store based on its website (Burberry UK); turning locations into click and collect depots (Dick Smith Australia and NZ); facilitating payment via mobile phone (Starbucks US); installing ‘endless aisle’ kiosks with access to a bigger selection online (John Lewis UK); and using data to personalise offers and rewards (Tesco UK).

As was once said, “the revolution will not be televised”.

 But in retail it will be coming to a screen near you.

* Jon Bird is CEO of specialist retail marketing agency IdeaWorks (www.ideaworks.com.au), and chairman of Octomedia, publisher of Inside Retail. Email: [email protected] Blog: www.newretailblog.com Twitter: @thetweetailer

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