Want to find out the truth as to what is happening to the retail market?  I’ve been trying to.  Anecdotally, many of the bricks and mortar retailers were down 20% of sales in 2011 and last year down a further 8-10%.  The general economic situation has a great deal to do with this of course but what I am really concerned about is the future of bricks and mortar retail considering the effect of internet sales.

One of the best ways to understand what may happen to Australian retail is to consider the online retail sales in the UK and US as indicators.  We should also note the difficulty in getting accurate figures for online sales.  If I buy a pair of shoes online from a small retailer in the US, where is this actually recorded?  Figures differ quite markedly depending on who is collecting the data and what methods they use to collect it.

In any case, current estimates are that about 6% of total retail sales in Australia are online and that 30% of these sales go to overseas companies.  Some also estimate the online share of non food retail sales at almost 10%.  That’s pretty big!  Take 10% of sales off any bricks and mortar retailer and they are going to start to struggle.

In the US, estimates are that 8% of total retail sales are online and in the UK it is even higher at 11%.  Both of these numbers are expected to continue to rise over the next 3 to 5 years.  So I think we can certainly say that within 5 years Australian online retail sales will grow past the 10% level and that this will be even higher for non food products.

So where will all this end?

I think Australia is still in the early days of online sales.  If we look at the market adoption curves where consumers discover a product (and this can be applied to a method of sale also) then I have no doubt that we are still in the early adopter stage and are yet to move into the early majority for most product categories.  Airline and online music sales may be far more advanced than this but for most product categories we are still in the early days.  What this does mean is that when we do get into the early majority taking up online sales as a relative norm, then the rate of sales growth online will increase dramatically.

So does this mean all bricks and mortar retailers need to get online?  Yes, I believe it does.

Predictions are that a total of 15-20% of sales will eventually be online.  I believe this will be much higher for non food related products, possibly going as high as 30% of retail sales.  I would also like to add, that the entire market place is likely to change.  As we change the way we communicate with each other; as mobile internet access becomes the norm and as retailing becomes less reliant on cash, the division between online sales and bricks and mortar sales will get a little blurry.  For example, if I walk into a store, review a product, decide I like it, then tap my mobile device to buy it and also have it delivered to my home address, have I just made an online sale? Or was this an in-store sale?  

Having read all of the above, this does not necessarily mean all sales will go online.  A key aspect about having an online presence for your store is that people will view information about the product online and then come into the store to actually make their purchase.  We are certainly seeing this as the case with some of the retailers we work with.  The online store simply becomes part of the promotional mix for the retailer.  More than this, with a good list of email addresses or social media followers, it becomes a really cheap and efficient way to market consistently to your target market.  Much of retail marketing is about putting offers to your market to entice them to enter your store and engage with you.  Online marketing is a much cheaper way of doing this so having an online store is a cost effective means to consistently promote.

So in answer to where will this all end; it ends with you making it easier for your customers to buy.  And that can only be good.

Contact Fit 4 Market for help with your online marketing today on: 08 8333 0734.