Physical retail in trouble as shoppers continue to move online

By June 16, 2016Ecommerce

New data out from BRC-KPMG shows online sales of non food products grew 13.7% in the year to May 31st, taking online penetration of non-food to 21.2%. Physical retail of course went the other way decreasing 1.6% in the three months to the end of May. During that period we also saw the collapse of BHS and Austin Reed – both bastions of the UK high street.

Retail analyst Diane Wehrle from Springboard is now predicting that retail footfall is in permanent decline and CityAM are running headlines saying 2016 set to be year of retail failures.

At Forward Partners we’re all about creating innovative, new businesses and it’s never nice when industries suffer, but the continued demise of non-food physical retail has an air of inevitability about it. The number of shoppers is declining and prices are under constant pressure and that will leave an increasing number of shops unable to generate sufficient sales to cover their fixed costs. This is likely to be an accelerating trend as each new failure further reduces footfall.

It’s a different story online though, where new retailers are coming to market with innovative products and services. The erstwhile physical retail shopper has moved online because the services are more compelling. That’s sometimes about price, but more often it’s about product selection, personalisation and convenience.

79% of non-food sales are still offline and at current rates of decline that will be 69% in three years. UK retail spend was £339bn in 2015, so that equates to £34bn of business moving online. That’s an opportunity!

Whilst the short term is all about retail market share moving from offline to online many of the more forward looking companies have blended clicks-and-mortar models and I expect that is what will dominate over time.