Furniture stores and discount retailers are likely to remain entrenched in bricks-and-mortar while books and electronics will increasingly be sold primarily online, according to a new report.
The research comes from the US arm of retail property management firm JLL, which used consumer opinion data, store closure statistics, same-store sales growth and ecommerce penetration to predict the future of 13 retail categories.
Although the report is based on data from the US, there are some interesting findings for Australian retailers.
Naveen Jaggi, JLL president of retail brokerage, said the study showed shoppers have a unique value system for determining how they buy and from where.
“We found shoppers are motivated to go either in-store or hop online based on how much time they have, if they need to touch the goods and how much money they are willing to spend,” he said.
“The varying degrees of these values against different product types will determine how resistant they are to consolidation and migration online.”
It found that time constraints and time savings, like the ability to purchase 24/7 and avoid crowds and lines, were the strongest reasons for online shopping. On the other hand, the ability to touch and try items remains a key driver for in-store purchases.
Bricks-and-mortar
According to JLL, the future of these categories is likely to be firmly bricks-and-mortar, either because they are experiential or due to thin margins that can’t absorb shipping costs.
Restaurants: are fairly protected against ecommerce penetration. The social sharing and food experience diners crave will out-weigh the convenience.
Off-priced retailers: offer a treasure hunt to consumers who want heavily slashed prices, which is not easily replicated online. Ecommerce penetration is less than one per cent, while same-store sales growth was more than three percent.
Dollar stores: have universal attraction and are all about saving money across all income levels. Ecommerce penetration is relatively non-existent, with only a few new online entrants like Brandless and Hollar, which offer flat-rate pricing. Dollar store same-store sales growth reached nearly two per cent.
Furniture stores: let shoppers test out and visualise their merchandise before buying. While ecommerce penetration is nearly 20 per cent, this category will straddle the line of online and in-store but remain heavily focused on bricks-and-mortar showrooms.
Mixed bag of online and in-store
Several categories will maintain a physical store presence along with an up-scaled online offering to cater to various shopper needs.
Apparel concepts and fast fashion: represent a unique marketplace shift—there are many store closures due to bankruptcies, but conversely a growing number of openings. More than 75 per cent of consumers prefer to buy their apparel in-store, but JLL said it expects retailers will continue to sync their online and in-store experiences to provide a seamless experience for their shoppers.
Grocery: continues to inch into omnichannel with several players offering delivery and pick-up options. However, 93 per cent of consumers still prefer to inspect their own produce. With fierce competition for market share JLL said it expects even more grocers to seamlessly integrate their offerings to meet the broadest swath of eaters.
Mass merchants: are popular with consumers due to their broad selection of goods, which kept same store sales neutral. Ecommerce penetration is nearly five per cent but set to grow as major players invest in their online platforms while maintaining their strong store presence.
Department stores: are feeling the heat from off-price and mass merchants, and are set to consolidate and shift sales online. Ecommerce penetration reached more than 13 per cent, but it is likely that some players will maintain their vast portfolio of stores and up their game online.
Children’s goods and toy stores: saw a 16 per cent jump in ecommerce sales as online retailers in this category offer huge time savings for parents. Sales in this category will increasingly shift online, but physical stores will be essential in crafting their brand experience.
Sporting goods: retailers have faced headwinds in the last year, with five top players in the US including Sports Authority and Eastern Outfitters filing for bankruptcy, closing more than 200 locations. However, more than half of consumers still want to buy sporting goods in-store, which will maintain the need for physical locations.
Bought and boxed online
Consolidation and commoditisation in these categories means sales are shifting primarily online.
Office supply: retailers have consolidated due to competition both online and from mass merchant retailers. This sector is expected to continue moving sales online as physical stores offer minimal experience, time and savings.
Electronics stores: that don’t offer an experience or point of difference are having a rough time, as ecommerce penetration in this category is nearly 10 per cent. Stores like Apple and that have a high-touch consumer draw will remain the outliers moving forward.
Book stores: have moved online with the highest ecommerce penetration of any category reviewed, nearly 25 per cent. Availability of books has become commoditised, but there are still a few independent bookstores that offer in-store experiences and food and beverage options, that will stay relevant.
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