Online shopping to account for 53% of retail sales by 2028
With the high street continually struggling and CVA’s being handed out to major retail players like confetti, new research revealing 53% of all retail sales will be made online by 2028 – up from 19% currently – will bring little joy.
The report, titled "The Digital Tipping Point", commissioned by law firm Womble Bond Dickinson (WBD) and conducted by Retail Economics, says the growth will be powered by 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.
Richard Lim from Retail Economics comments: “It's no exaggeration to say that the retail industry is undergoing a period of unprecedented change. Successful retailers have always had to reinvent themselves to stay relevant, but the pace of change will inevitably prove too fast for many, as shown by the number of CVA’s 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.”
The Gen Z and Millennial "digital natives" will make up half of adult consumers in 10 years and, as the UK adult population evolves over the next decade, the shopping habits of younger groups will become more dominant.
The research showed that 62% of 16-24 year-olds (Gen Z) shop online at least every fortnight, compared with just 29% aged over 65 years, averaging around three online purchases per month. Millennials also spend the highest proportion online currently (22.1%) averaging £42.32 per online transaction and spending £110.45 online each month.
Over half (53%) of Gen Z consumers said smartphones influenced them most in terms of "awareness" of new retailers and brands, compared with just 3% of those aged over 65. This reveals how much more online marketing impacts younger adults.
However, almost a quarter of Gen Z’s also said they are more likely to do shopping in high streets and shopping centres, highlighting the complexity of the customer journey and the importance of shopping experiences for these younger consumers.
There have been five consecutive years of net closures of retail stores and, with dwindling levels of footfall across high streets, shopping centres and retail parks this trend seems set to continue.
The report also reveals that 10% of consumers say they will shop less in physical stores in next 12 months, outweighing those who suggested they will shop more frequently in-store. After books, clothing was the largest product category contributing to online retail sales.
With more consumers turning to online for even mundane purchases, demand for retail property is at its lowest since 2007 and the role of the store has become polarised with flagship "destination" stores continuing to attract sustainable levels of footfall, while other secondary locations, with dwindling levels of footfall, remain under pressure.