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IN DEPTH: Online vs Offline
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Online vs Offline
How will we shop in future?

BT 201809 Indepth 01网络技术日新月异,电商如雨后春笋般进入人们视野,线上购物如火如荼、势不可挡。即便如此,线上购物仍只是冰山一角。2015 年线上购物占总零售额 7.4%,2020 年这一比例有望升至 14.6%。线上以及线下购物有着各自的优点,一方面,消费者享受线上购物带来的轻松、便捷、实惠,而另一方面,消费者看重线下购物的真实、立等可取以及退换无忧。以亚马逊为代表的线上购物以及以沃尔玛为代表的线下购物都在彼此的领地内发功用力, 企求更大的市场份额、更大的利润。目前看来,沃尔玛借助其自身强大的分销渠道、物流以及新收购电商的专业技术,将其商品价格降到了亚马逊难以企及的水平,因而也在跨界这一尝试上更加成功。然而电商还有最后一个杀手锏——在线搜索。年轻消费者消费前更倾向使用在线搜索,而在搜索过程中电商更容易出售其商品。综上,线上购物发展势头强劲,其优越的便捷性吸引着越来越多的消费者,而线下购物仍然是大多数人的首选,线上购物和线下购物同样有希望。

Shopping industry is fundamentally changing. With the rise of the Internet and the popularity of various online retail sites, shopping has never been easier and the $2.4 trillion global online shopping scene has been booming during the recent years. With a click of a mouse, customers can buy anything they need and get it delivered to their home address within a few hours or days. However, more than half of the American retailers are now offering same-day delivery, up from 16% a year ago, according to the “2017 Digital Commerce Benchmark Survey”. Customers also appreciate the ease of eCommerce, as they can shop whenever they have time, without any pressure.

On the other hand, many people still prefer the experience of brick-and-mortar shops. Customers in physical stores can check the quality of the product before they decide whether to buy, as products purchased online can differ from customers’ expectations once they arrive. People hardly get the idea of the quality of the product by looking at images. Furthermore, the ability to buy products immediately without the need to wait for delivery, as well as easier returns to physical stores than to online sites, still appeals to a number of people who prefer to visit traditional stores for shopping.

BT 201809 Indepth 03Majority of Sales Is Still Made In Shops

Although the value on online retail is constantly growing over the recent years, majority of all purchases are still made in physical shops. As the following graphic shows, online retail space is expected to grow to a staggering $4.1 trillion by 2020, up from $1.5 trillion in 2015. And while e-commerce represented 7.4% of total retail sales in 2015, this number is expected to rise to 14.6% by 2020, according to the research done by eMarketer.

Amazon and Wal-Mart – Online and Offline Kings

BT 201809 Indepth 06Two companies that best represent the surge of online retail on one hand, and established traditional stores on the other, are Amazon and Wal-Mart.

Wal-Mart has been the dominant player in retail for a long time, and the way they controlled the price of goods just because of their sheer size resulted effectively in a monopoly. But in 2017, Amazon marked the 20th anniversary of their IPO, and began to scale their platform to the extent where they have become a legitimate threat. Market capitalization of Amazon is $460 billion - already twice as high as Wal-Mart’s which is estimated at about $233 billion.

In order to be on track with Amazon’s increasing importance in the retail space, Wal-Mart had to employ a new strategy – they entered the online retail space. Wal-Mart made a $3 billion acquisition of Jet.com, and hired the e-commerce retailer’s CEO Marc Lore to help Walmart.com to have a fighting chance against Amazon. Many analysts believe this was a smart move by the brick-and-mortar giant, as Wal-Mart’s online sales surged by 63% in its first quarter earnings report. The retail-giant’s distribution and logistics systems, combined with Jet.com’s online know-how, might bring prices down to a level that could be hard for Amazon to follow. To increase its market share, Wal-Mart’s e-commerce division has also started to offer free same-day delivery in NYC.

Similar to Wal-Mart trying to enter the online space, Amazon’s strategy is to increase its presence in the territory where Wal-Mart is the dominant player - physical retail. Amazon made a noisy $13.7 billion acquisition of Whole Foods in June, and is hoping to increase its distribution capabilities and acquire a much stronger brick-and-mortar presence. Nonetheless, Wal-Mart has still a head-up in the distribution of fresh groceries and overall presence on strategic locations, given its warehouse space that is almost ten times the size that Amazon has to offer.

Online Research of Products Is a Chance for Online Retailers

According to the Retail Dive Consumer Survey, more than 65% customers make an online research of the product they intend to buy, even if they are not going to buy it online. While doing so, customers usually focus on online reviews of the product and the company’s website. This behavior is especially notable with younger male shoppers (25-34 years). This gives online retailers an important heads-up as they are the first to sell the product during the customer’s online research.

BT 201809 Indepth 04Why Do People Shop Online?

The KPMG Global Online Consumer Report stated that the most important factors that motivated customers to buy online instead of going to a physical store were time flexibility and cost savings. This is no surprise as online shopping can be done conveniently at any time of the day, and the ability to compare prices is an absolute advantage of online shopping as compared to going to a shop. The following graphic show the most important factors according to KPMG’s survey.

BT 201809 Indepth 05Summary

The retail war between Amazon and Wal-Mart might be the best example on where the future of retail lies. Both physical and online retail has a future, as many customers still prefer to see the product before buying it, want to try the item on, or simply don’t want to wait for its delivery. But the growing ease of buying products online will attract more and more customers in future, and with advancing systems, platforms and distribution capabilities it might also cater to customers who want to buy groceries online and have them delivered to their doorstep.

In fact, groceries are already in the top 5 products bought online in UK and China, according to the KPMG’s survey. Although the growth of online shopping is unquestionable, physical stores will still retain their place in our shopping routines.

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