A new study shows that the rise of ecommerce is continuing to eat into sales at brick and mortar retail sites.
The study, released by the retail consulting firm HRC Advisory, found that sales at traditional shops had declined by as much as 25 per cent.
While this decline is not yet steep enough to justify store closures on a large scale, it shows companies that mix high street retail with ecommerce struggling to keep up with online-only companies such as Amazon.
The nature of online shopping requires paying people, or using robots, to perform tasks that customers in a physical store would do themselves. For example, a customer in a supermarket would pick items off the shelves, pay for them at the till and take the items home with them. Online retail requires order pickers, payment processing and a delivery mechanism of some sort.
HRC Advisory CEO Antony Karabus advised retailers to “re-examine the cost structures of their physical stores and infrastructure, and become more efficient omnichannel operators”.
Other findings of the study include:
- The pace of growth in online sales is slowing. Whilst online sales are continuing to grow, they are doing so more slowly than they were a few years ago. In the 11 department store chains that the report looked at, the rate had declined from 39.3 per cent in 2012 to 18.6 per cent in 2015, while sales growth from 22 specialist retailers had declined from 17.5 per cent to 9 per cent over the same period.
- Online returns and price matching lead to negative profitability. The cost of returned items is a major drain on profits, as items are often not returned in a condition whereby they can be resold. Meanwhile, price matching can be useful in boosting sales, but often at the expense of profitability.