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Why online retail growth will continue towards 2028

Full report: The Digital Tipping Point: 2019 Retail Report

Why online retail growth will continue towards 2028

Retailers adapting to a growing online channel

The last decade has seen analogue consumerism crumble, fuelled by the relentless growth of online and the importance of experiences and heightened consumer expectations. This short article focuses on our research concerning how retailers are adapting to the new age of retail.

The power dynamic favours the consumer, and the digital disruption will only continue in the next ten years as digital natives (Millennials and Genzs) form the majority of the adult population. 

We forecast that online will account for more than 50% of all retail sales by 2028, and our research identifies 10 principle reasons why (detailed in full report). Below, we outline two key reasons which address how retailers and brands are reacting to the changes brought on by the digital age.
 

“Online will account for more than 50% of all retail sales by 2028”

 

1. New retail business models

A new era of retail requires new business models. Subscription services and secondary markets have been quick to react, filling new spaces in the market with intelligent solutions. The music and entertainment sector is a standout example, evidenced by streaming services such as Netflix, Spotify, Amazon Music and others. 

Such models will no doubt proliferate to other sectors, and with AI advances, it will be the imagination that limits creativity, slickness and ingenuity of the adaptive business models of the future.

For now, traditional retail business models will be pushed to the limit as new models emerge and are rapidly adopted by consumers. Rental markets, curated subscription models, the service economy, auto-replenishment and smart re-ordering have the potential to alter the retail norms of today, which will be powered by online interfaces, propelling online spend to new heights.

Ultimately, retailers will be focusing on how to merge transformative models with existing business models to better serve their customers. Naturally, the composition of boardrooms will adapt to reflect the changing nature of the retail sector. 

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This work forms part of a wider piece of research and is a downloadable in pdf format

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2. The rise of AI

AI application will touch every link of the retail value chain, transforming the customer journey with innovations like auto-replenishment models, automated river vehicles, personalisation at scale and virtual stores. 

Moreover, intelligent data mining, innovative transformation strategies and trustworthiness will be prerequisites for sustained business in an increasingly transparent trading environment characterised by shifting power dynamics. 
 

Figure 15: Key enablers for full readiness

 

Dissolving multi-channel marketing paradigms will be replaced by a single, cross-platform, omnichannel experience. Blurring the lines between in-store, online and on-the-go will, in some cases, mean stepping into a physical store that feels like a tangible extension of its online counterpart. 

Whether AI is being used to identify a more efficient delivery route or accurately predict a customer’s pregnancy status, the dreamy realms of science fiction are becoming reality. Many of the technological foundation stones have already been laid and developments are unfolding at an unprecedented pace.

 

3. Managing risk

Retailers are eagerly adopting new technologies to leverage new opportunities. However, new risks are  merging. Consumers are increasingly conscious of the need to protect personal data and their privacy in  order to reduce the risk of fraud, identity theft and misuse of their data. They also expect companies to be transparent about the data they hold on them, what they use it for and how it is protected.

We found that over a quarter of respondents surveyed have taken some action to limit the amount of data shared  with companies, reaching almost a third for 16-24 year olds. Also consumers also felt that the perceived benefit from the exchange of their personal data was not equitable. Two thirds of consumers  think that businesses benefited more than consumers. Just 8% of respondents thought that consumers  benefited the most with 26% saying that there was an equal exchange of value.

The biggest risk we foresee regarding future online growth are consumer attitudes towards sharing  personal data and the perception of retailers’ responsible use and protection of that data. 

Figure 17. In your opinion, who currently benefits the most from personal data exchange?

 

Past and present factors in the lead up to online prominence

Relatively speaking, the rise of online retail has been fairly swift, especially within the last decade. The retail customer journey has been reshaped beyond recognition and technology, as already mentioned, has facilitated much of this growth, but how did things evolve?

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Found this short article interesting?

This work was conducted by Retail Economics in partnership with Womble Bond Dickinson. It looks at the development of technology within the UK retail industry and the rise of the online channel, accounting for past, present and future factors. The research forecasts that the ‘digital tipping point’ where online with surpass in-store spend will be around 2028 (based on given assumptions).  Topics covered: the evolving customer journey, online penetration, shopper demographics, delivery developments, store roles, digital technology, AI and future risks.

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