The retail industry, even with its current challenging forces, remains very vibrant. Last year confirmed that we are all resilient consumers who will continue to shop our favorite brands. In May 2021, E-marketer forecasted that retail sales globally would rise six percent to just over $25 trillion, which was a significant comeback from 2020. By the end of the year, global retail sales actually grew 9.7 percent, bringing total spending just over $26 trillion.
Last year’s in-store sales grew a healthy 8.2 percent globally to just over $21 trillion—which was more than was spent in 2019. “Pent-up demand from in-person shoppers accelerated the recovery by two full years.”
When this E-marketer research was published in January 2022, brick-and-mortar sales were projected to grow between 2.6 and 3.4 percent for the remainder of the forecast out to 2025. More spending is expected in physical retail than e-commerce in 2022 ($702 billion versus $604 billion), despite its slower growth rate.
This article, and the featured image from a recent NRF trade event in Cleveland (home of the Rock & Roll Hall of Fame), are a reminder that retail does indeed rock. It includes some of my favorite statistics on the industry and some projections on where we go from here.
E-commerce Spikes Have Abated
This year will mark a major milestone worldwide with e-commerce sales crossing $5 trillion for the first time.
The spike seen in 2020 of over 26 percent growth is abating, but the sector will still enjoy double digit growth through 2024. By 2025, e-commerce will represent nearly 24 percent of total global retail sales.
Some interesting statistics about e-commerce:
- There are 7.1 million online retailers operating globally, with 25 percent of these in the United States.
- 87 percent of US consumers now start their shopping experience online with product searches. Of that percentage, a massive 74 percent of consumers begin their product searches on Amazon.
- Gen Z has the greatest online shopping preference of any generation, with 87.6 percent of shoppers preferring it.
- 73 percent of businesses are currently selling via social media, with that number expected to rise to 79 percent in the next three years.
- 73 percent of shoppers are more likely to decide to buy an item if the shipping is free.
The Resiliency of Physical Stores and Those New Services
E-commerce will remain an important component of the successful retail mix. The data confirms, however, that omnichannel will rule the successful future of retail.
“When it comes to year-over-year growth in omnichannel sales (merchants with an online and brick and mortar presence), 61 percent of omni retailers in the US, 58 percent in the UK, and 56 percent in Canada reported higher sales growth with a whopping 21 percent of omnichannel merchants in the US reporting ‘significantly higher’ revenue—far more than the overall average.”
Physical stores are back and rocking once again. On multiple levels, as humans, we enjoy the interaction with products.
- 62 percent of consumers want to “see, touch, feel, and try out” items, and hence choose to buy from physical stores.
- 61 percent of customers want to try products in-person before making a purchase.
- 76 percent of people prefer to go to a physical store for holiday shopping.
We also are increasingly leveraging technology to enhance our shopping experience. For in-store purchases, 82 percent of smartphone users consult their phones.
Those new services that accelerated during the pandemic are growing and are here to stay.
- 68 percent of US consumers now use BOPIS (buy online pickup in-store).
- From the pandemic’s start through 2021, the share of retailers offering curbside pickup has risen to 44 percent.
These new services, however, can be very expensive and detract from profitability without technology optimization.
Consumer Expectations and Challenges Ahead
As Walmart’s Sam Walton famously said, “There is only one boss: the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
The good news: each month, customers spend 69 percent of their discretionary income in-store. However, to stay relevant, physical stores will need to continue to evolve to keep up with less patient consumers.
Labor challenges are impacting all industries. Supply chains are stretched.
Inflation does not look like it will be subsiding any time soon.
US inflation has almost quadrupled over the past two years, but in many parts of the world, it has risen even higher. The Ukraine war is adding additional global uncertainty to the stability of global markets.
Retail is vibrant, resilient, and will continue to rock into the future, but in the near term, the clouds of uncertainty will increase. US consumers have already started cutting back. The biggest reductions are in driving (52 percent), large purchases (47 percent), travel (46 percent), entertainment (50 percent), and clothing or other goods (42 percent).
Technology will remain a key driver and differentiator where retail goes next.
A recession is probably ahead in 2023, but it’s worth reminding ourselves that a digitally empowered consumer enjoying more immersive customer experiences with strong brands are what will deliver a brighter future of retail.
To read the full article, visit the author’s website.