Monday, 18 July 2016 12:32

Online retailers plan ‘bricks and mortar’ stores to drive more sales

By Peter Dinham

An increasing number of Australia’s “pure play” online-only retailers are now planning to open physical stores to drive sales as a way of further extending their market reach.

According to the latest Commonwealth Bank Retail Insights Report, 18% of the country’s online-only retailers are planning to establish a physical outlet in the year ahead, up from 13% in the previous half yearly report, and over three quarters of retail businesses will have a physical presence.

The Commonwealth Bank’s national manager retail, Jerry Macey, says the drive towards omni-channel retailing is “picking up pace” with many online and physical businesses seeking to extend their reach.

“Bricks and mortar and multi-channel retailers are doing more online as customer preferences evolve. At the same time, emboldened digital retailers are opening physical stores to complement and drive further online sales. We have seen large online retailers such as Amazon unveil physical stores in the US, and this trend is expected to strengthen over the year ahead with almost one in five pure play online retailers planning a bricks and mortar outlet by early 2017,” Macey said.

He says that retailers are also forecasting robust overall online sales, with an average 24% growth rate expected in the year ahead, up from 20% in the previous half, while overall they expect 35% of online sales to come via mobile devices over the next 12 months.

According to the research, conducted for the Commonwealth Bank by ACA Research, in an effort to capture expected online sales growth, technology budgets are again set to increase over the next 12 months with 45% of retailers expecting to lift investment and overall, the top priorities for investment are e-commerce, loyalty programs and social media.

And, on the market outlook, the report shows pure play online retailers are significantly more optimistic than their multi-channel peers, with 46% expecting an improvement in conditions, compared to just 28% among multi-channel businesses.

Macey says that, when looking at the drivers behind the outlook for retailers, for those expecting a decline, 95% attribute it to economic factors, and conversely, for retailers indicating an improvement in business conditions, 71% attribute it to internal factors such as business growth and the introduction of new products.

“Our research shows the most optimistic retailers are those who have taken control of their own destiny, rather than looking to external economic conditions to drive sales growth.

The detailed findings of the research:

1. Retailers are forecasting continued online sales growth in the next 12 months with many increasing technology budgets to capture growth.

  • Retailers remain positive about sales generated from online orders in the year ahead.
  • Overall 38% of sales currently generated online - up from 35% (multichannel – 18% to 22%).
  • Expected growth in online sales over the next 12 months at 24%, up from 20%.
  • Usage of online purchases made through a mobile devise continue to increase.
  • Percentage of mobile sales has increased 23% compared with last wave at 18%.
  • Overall online sales via mobile expected to increase to 35% in the year ahead.
  • When compared to the overall sector, pure play online retailers anticipate a decline in the growth rate of sales via mobile devices (27 per cent down from 44 per cent in prior period).
  • A total of 45% of retailers expect an increase in technology spend, up from 43% in the previous wave.
  • The top three investments in technology planned for the next 12 months are ecommerce, social media and loyalty programs.
  • For the single biggest priority investment, the top was ecommerce (17%, with 41% of all retailers investing here in some way) followed by retail network expansion (13%; with 27% investing here in some way) and personalised customer experience (11%; with 30% investing here in some way).

2. Pure play online retailers have a more positive view on business conditions in the year ahead than their multi-channel counterparts.

  • Net improvement of +10, remains positive although it has reduced from the optimism seen in last report (+20).
  • This was more pronounced across multi-channel (+21 to +5) whereas pure play online were substantially more optimistic this wave (+14 to +31).
  • NSW/ACT were the most positive on outlook for business conditions (34%) while WA was the least optimistic (sharp drop from 29% to 17%).
  • Confidence appears to be driven by engagement – 71% of the reasons given for being confident are internal (such as a new product being launched) compared with just 13% for those seeing conditions declining.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

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