Spotlight: Retail Myths Exploded

Retail Myths Exploded
 
Retail Myth One

21 September 2015, words by Marie Hickey

Online retailing is killing off the need for physical stores.

 

There is growing consensus that the rise of online retail is not killing the UK high street. In some cases, it is actually aiding its revival as the boundaries between online and bricks & mortar become increasingly blurred.

Retailers are becoming more aware of the role physical stores can play showcasing product and the brand, even though the transaction may take place online. This is often observed in sales performance data with multichannel retailers (those with stores) tending to report stronger online sales than their pure play counterparts; 21% year-on-year as of June 2015 as opposed to 13% for the latter. Anecdotally some retailers have found in those markets where they have opened a new store there is a corresponding increase in online sales.

One driver of this has been the growth in click-and-collect. This segment of the online retail market has been the fastest growing accounting for an estimated 18% of total online sales last year, four times what it was in 2010. Some commentators suggest that its expansion will soon outpace home delivery particularly for non-food where it accounts for a smaller share of online. This has coincided with an increase in the number of ‘traditional’ retailers offering in-store click-and-collect. 44% of retailers in 2014 offered this service, the previous year it was 32%. For larger retailers with a more extensive store network the participation rate is 57%.

The relationship between online performance and physical stores is starting to attract pure play retailers into physical space.

FIGURE 1

Original pure-play retailers operating with physical stores

 
Figure 1

Source: Savills Research

Twenty-two retailers have already made the transition from pure-play to multi-channel either with stand-alone units or concessions such as Screwfix and more recently Misguided with their Selfridges concession.

One of the biggest moves into bricks & mortar has been the announcement that China’s biggest online retailer, Alibaba, has taken a 20% stake in the ‘physical’ retailer Suning. It is envisaged the deal will allow Alibaba customers to experience the product first-hand and collect the item from store but with the whole transaction process taking place on-line.

We expect this trend, known as online-to-offline (O2O), will gather pace meaning that we are likely to see more pure play-play retailers enter the occupational market in some form over the coming years.

 

 
Multi-channel retailing in numbers
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Key Contacts

Marie Hickey

Marie Hickey

Director
Commercial Research

Savills Margaret Street

+44 (0) 20 3320 8288

 

Tom Whittington

Tom Whittington

Director
Retail Research

Savills Manchester

+44 (0) 161 244 7779