Low consumer confidence could mean less gas-guzzling trips to the shops, but e-commerce continues to thrive and that presents a huge opportunity, says Rebecca Ward
There is little doubt that the current recession has had a profound impact on the UK’s retail sector, with the list of fatalities including household names such as Zavvi, Woolworths, The Pier and Barratts. But while layoffs and closures hit the high street, the growth of e-commerce continues unabated, with the latest IMRG figures demonstrating a 13 percent year-on-year increase in online sales.
Whilst the high street suffers, e-commerce continues to thrive and the benefits for retailers and the economy are clear: UK shoppers have spent over £100 billion online since internet shopping began and online retail spending is likely to reach £44.9 billion per year by 2012, up from £19.5 billion in 2008. The web is expected to account for an incredible 40 percent of all UK retail sales by 2020. These are big numbers and demonstrate the potential opportunity for e-retailers and the great willingness of UK consumers.
In addition to this, the demographics of web shoppers keep the online channel popular: at one end of the spectrum, those that still want to spend their disposable income, but with comfort of the online shopping experience, where they are shielded from scrutiny and judgment of their purchasing power, despite economic conditions. At the other end of the spectrum, shoppers feeling the pinch are also drawn online by the web’s wide choice and bargain prices. The all-powerful search engine makes those bargains easier and easier to find.
And as a result, businesses are bolstering their e-commerce strategies, making every possible effort to lure more and more internet-savvy shoppers to this cost-effective channel. Yet this fundamental shift in human behaviour – when people stop hitting the high street and instead start browsing virtual storefronts – creates a silver lining in today’s cloudy economic times that has been too quickly overlooked; a positive side effect on the environment.
The environmental benefits
How does this shift from in-store to online benefit the environment? On multiple levels. First, there are the energy savings from shutting down the stores themselves. The UK retail sector generates some 12 million tonnes of waste a year at a cost of £360 million. And research from the US conducted by BuyGreen.com found that e-commerce warehouses use just 6% of the energy used to operate a traditional retail store.
Beyond the energy savings in the stores, online shopping also reduces the transportation energy consumed by shoppers. BuyGreen.com revealed that even overnight air shipping uses 40% less fuel than the average car trip to a shopping centre. And UK retailers are taking it upon themselves to continue to invest and improve the effect they have on the environment with, for example, many supermarkets investing in electric-powered, low-carbon-emitting vans for grocery deliveries.
In addition to the palpable reduction in travel costs and carbon emissions associated with shopping in brick and mortar stores, virtual storefronts also provide businesses with the opportunity to understand and analyse their customer base more effectively. This enables businesses to create a closely monitored inventory management system at centralised warehouses that reduces the inefficiencies of distributed storefronts and mismanaged inventory.
A more profitable future
While the current recession is partially to blame for the negative emphasis being placed on brick and mortar store closings, if you look a little closer and with some optimism, e-commerce can become the silver lining for retailers that are prepared and able to change their focus.
Companies that embrace the online channel and adjust their sales models to accommodate the acceleration of e-commerce are not only more likely to get a portion of the profits still available for the taking; they are also investing in a business strategy that has an incredible upside for our environment.
The online channel cannot take this growth for granted. As the popularity of conducting transactions on the internet increases, so do the expectations of online visitors. And with the ubiquitous search engine now a consumers number one tool, the competition is literally a click away. Increasing understanding of how visitors carry out transactions online, and taking steps to improve customer experience will ensure that the web continues to become the most convenient shopping channel of choice.
At a time when both the economy and the environment are top of mind for many, investing in e-commerce – the green path to profitability – is truly a win-win situation.
Rebecca Ward is Chairman and CEO of Tealeaf.