talking trade Dog, meet Bone Industry commentator Michael Weedon discusses online vs offline trading
news that it was to close after 152 years, independent hardware and housewares retailer Goldings of Bedford cited, among other challenges, today’s “internet society”. On the same day, daily newspaper ‘The
T
Guardian’ carried a tale about a new report which predicted that online shopping could more than double its share of the retail market by 2028. So, could it? Well, it could. But it may not. Barking up the wrong tree - or the right one? Richard Lim, chief executive of independent economics research consultancy Retail Economics, was quoted in ‘The Guardian’ piece as saying: “Successful retailers have always had to reinvent themselves to stay relevant. However, the pace of change will inevitably prove too fast for many. It definitely feels like the digital retail revolution is only just getting started.” Google-types have a habit of saying something along similar lines: the pace of technological change has never been this fast – and will never be this slow again. In another interview, Marc Dench, the chief financial officer of Midlands-based clothing retailer Joules (which also knocks out a bit of kitchenware), revealed that when looking at shop operations it now forecasts on the basis of year-on-year turnover declines of 5-10%. Yes, that’s actual budgeting for less to come through the till. Every year. Tried that? He also said that the company takes an
overall view of the stores, including their digital footprint, and it’s interesting to note his comment that when Joules opens a new
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hey can’t let it lie (and neither can I). The online-sales-are-taking-over story has legs. Announcing on July 8 the sad
physical shop, online sales go up in that area by 5-10%. So, Joules looks at a whole pack of KPIs [Key Performance Indicators] including the potential to acquire new customers, the prospects for Click & Collect – and returns. Fashion retailer Next which, like Joules, has sales split roughly equally between in-store and online, also pays close attention to returns - as they are proving to be a measurable generator of footfall; footfall which buys products in-store when it gets there. Next has gone one further and now provides collection points in its stores for Amazon packages as well. If retailers with extensive shop estates are running with the store hares and hunting with the online hounds, are the predictions about a doubling of the share that goes to the dogs plausible? If the rate of change accelerates, yes, they are plausible. But they are not certain. A decade ago the percentage of sales online was of the order of 5% - and year-on-year share of the market between online and offline was around 50% each year. Had that rate of growth been maintained, then the entire market would have been online around the turn of 2015-2016. And by now 432% of sales would be made online - which is barking mad. By last year the year-on-year growth rate in
market share had dropped to 9%. There were predictions that this year it would settle around 7%. The BRC [British Retail Consortium] and CBI [Confederation of British Industry] have both published statistics recently putting year-on- year growth in online at around 4% today. Now 7% is a magic number. It’s the rate of
growth at which, if it is kept up consistently year after year, will double an original amount of, well, anything, in 10 years. So, for the predictions of online to grab more than double its current share in 10 years, it will need to increase its rate of growth from the current 4% to nearly twice that. Also, if we look at the whole online retail
market, which is widely seen to have reached about 18% of the total in 2018, doubling it in a decade would get us to just over a third of the total - 36%. The argument is stronger if we just look at the non-food half of UK retail, which includes housewares. There are no official figures for the share in non-food, but I calculate this at about 28% and the BRC have it at somewhere between 25% and 30%. If the online growth rate rose to 7%, it might, by 2028, have breached the 50% mark - but it will take a seismic technological change to alter the dynamics of that pattern of change.
Now that is, of course, possible. Twenty-five years ago there was no Amazon – and very few
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(now very rich) people even imagined such a thing. A dozen years ago there was no iPhone and almost none of us had a smartphone in our pockets to buy stuff with. Now, more than 90% of adults do. Things can change very quickly. But in the meantime, if more and more
retailers like Joules and Next continue to blend online and offline until there is no significant distinction between the two in their operations, that market share figure will blur into meaninglessness. Soon, the two could be indistinguishable, so if more than 50% of the market does move online, we may never even know it.
That should give the headline writers something to chew on.
• Michael Weedon is chair of the FSB [Federation of Small Businesses] Retail and High Streets Policy Unit and managing director of exp2 Ltd, which carries out projects including research and report creation for clients in the retail industry, including data providers, place managers and individual retailers. He established exp2 in 2016 from a leading trade association role.
Michael’s contact details are: Mobile: 07411 763 551 Email:
Michael.weedon@exp2.co.uk Tw: @michaelweedon
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twitter.com/Housewaresnews
July/August 2019
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