Online purchases will account for more than 50 percent of UK retail sales in the next 10 years, up from 19 percent currently, new research suggests.
According to the Digital Tipping Point report, commissioned by law firm Womble Bond Dickinson (WBD), the rapid growth will be driven by three main factors: the changing demographic of the UK adult population; the development of faster and cheaper in-home deliveries; and fewer physical stores.
However, there are also potential risks ahead for retailers that don't prioritise data security when embracing the new technologies needed to thrive in a digital future.
Changing demographic of UK adult population
Gen Z and Millennials will make up half of adult consumers in 10 years, meaning their shopping habits will become more dominant. Millennials currently spend the highest proportion online (22.1 percent), averaging 42.32 pounds per online transaction and spending 110.45 pounds online each month. Almost two thirds (62 percent) of 16-24-year-olds (Gen Z) shop online at least once a fortnight (compared with just 29 percent aged over 65 years), averaging around three online purchases per month.
Of the Gen Z shoppers, over half (53 percent) said smartphones influenced them most in terms of 'awareness’ of new retailers and brands compared with just 3 percent of those aged over 65, showing the impact of online marketing on younger adults.
Faster, cheaper and in-home delivery to drive online purchases
The top three factors that would accelerate online shopping for consumers are cheaper (47 percent) and faster (26 percent) delivery and easier returns (26 percent), according to the study. Easier returns are more important for Gen Z (28 percent) and Millennials (30 percent) signalling the changing expectations of future consumers.
Emerging business models such as subscriptions and auto-replenishment are also driving the acceleration of online shopping.
Fewer stores to channel consumers to digital retail
As stores continue to shutter across the country, with five consecutive years of net closures of retail stores, shoppers are flooding to online retail. 10 percent of consumers said they will shop less in physical stores in the next 12 months, outweighing those who suggested they will shop more frequently in-store.
As footfall continues to be strained across the country, the emergence of a new store focused on experience has emerged, though it is perhaps not enough to keep the numbers of shoppers as high as it once was. Demand for retail property is at its lowest since 2007, according to the report.
Challenges for the digital future - data sharing concerns
There still remain challenges for the online future, however, as consumers become increasingly aware of the need to protect their personal data. Over a quarter of respondents had taken some action to limit the amount of data shared with companies, reaching almost a third for 16-24 year olds.
The report found that consumers believe businesses benefit far more than consumers when it comes to data sharing. Two-thirds thought companies benefit more from the sharing of data compared to just 8 percent who thought consumers benefited the most. Only a quarter (26 percent) said there was an equal exchange of value. Financial rewards, free and discounted products rank most highly for consumers in terms of benefits they would still be willing to exchange their data for.
Commenting on the report in a statement, Richard Lim, Retail Economics, said: “It’s no exaggeration to say that the retail industry is undergoing a period of unprecedented change. Despite concurrent waves of political and economic upheaval in our midst, our work with retailers suggests this is a mere distraction from the seismic structural shifts reshaping the retail landscape.”
”Successful retailers have always had to reinvent themselves to stay relevant. However, the pace of change will inevitably prove too fast for many – as shown by the number of CVAs hitting the headlines. While the impact of future technologies and consumer acceptance is highly uncertain, it definitely feels like the digital retail-revolution is only just getting started.”
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