Online shopping currently accounts for around 18 percent of retail transactions in the UK according to ONS statistics. In contrast Statista shows that the equivalent figure for North America is 8.1 percent and by 2023 the share of global retail sales will be 22 percent - up from 14.1 percent in 2019 (Ecommerce Worldwide 12 March 2019).

How far can this market grow and what are the implications for traditional physical stores? Much has been written about the demise of the high street but what are the determining factors? As young people become attached to digital forms of entertainment is such a change a reflection of a more sedentary lifestyle made possible by technology whereby it is easier and more desirable to make purchases from an armchair 24/7? And if this is indicative of societal change is there anything to be done to reverse the trend (for example events to draw people into physical stores)? Indeed, is it in individual companies' interests to continue investing in such outlets?

I recently came across an article in thebalancesmb.com (21 September 2019) that addressed 'The Advantages and Disadvantages of Ecommerce ' for SMBs. In fairness, it's easy to see the benefits from a consumer's perspective, particularly those with a busy lifestyle or living in remote locations. Put simply, e-commerce is convenient. You don't need to travel to the shops (indeed from personal experience you can purchase goods from favourite stores in other countries with ease), you don't have to queue and if the product you want is not available then you can move to another store with a click. From a pricing perspective it is easy to compare prices online and shopping around has been given a new dimension. What you don't get of course is the personal touch, the ability to touch and feel the product prior to purchase or the immediate gratification that accompanies a store purchase.

Of course, the other limitation on such consumer behaviour will concern the customer’s attitude to risk and any security concerns surrounding online transactions. A June 2017 American Express survey showed that nearly 40 percent of consumers have halted purchases over security fears. Evidence suggests that the use of cards for such transactions varies greatly globally, with cash on delivery still being widely used in countries such as India and parts of Eastern Europe where the number of unbanked individuals will also have an impact. Even in the US, Amazon has recently announced that it is partnering with Western Union to roll out a new program that will enable customers making online purchases to pay with cash (Business Insider, 18 September 2019).

What are the implications of ecommerce for retailers? Well, clearly it has implications for pricing strategy and competition. For consumers online, price comparisons are simple. With identical products available on different sites there becomes very little opportunity for price differentiation. Indeed, for those of us who studied basic economics, this seems near to 'perfect competition ' with all the benefits of potential price wars lying with the consumer.

There will, of course, be costs associated with website enhancement and ensuring secure payments, but what are the other factors impacting retailers who shift to an online model? In theory, at least, they will be able to expand their customer base and will lessen the dependence on physical outlets. They will still need storage space but this will normally be cheaper than the relative cost of a physical retail outlet. It has also been claimed that in these circumstances stock will be easier to manage. Less popular items, for example are still available while not taking up more expensive store space. Clearly for digital items such as music, films and books there does not need to be any storage space and the benefits are even more obvious.  

With transactions taking place online, there is significantly greater opportunity for data collection and targeted marketing, but this needs to be managed considerately to avoid becoming intrusive and alienating the customer.

So what are the potential downsides? Well of course any online operation requires effective logistics. Retailers talk of the importance of 'the last mile' and we have already noted the importance of immediate gratification attached to in-store purchases. To give a personal example I recently bought a new espresso machine at a local store. Having almost destroyed a coffee machine during a recent hotel visit I wanted someone to explain how the various models functioned. I also have a bit of a thing about colour and the way the machine would fit in with our kitchen decor. Maybe I'm getting older but I find I can't always rely on the images provided online. I wanted to see what the product looked like in real life, and I wanted someone to show me how it worked. Having made my choice, I wanted to take it home and use it. Now there are ways around these issues. Items can be demonstrated online and some companies can deliver same day, but it isn't an exact replica of the service I received.

How good are we at making choices online? What about the issue of returns? A 2018 Forbes article (14 February) highlighted the issue of returns and their impact on online retailers. It noted that customers frequently bought three or four items online with the intention of keeping the one that best met their needs. How big an issue is this? According to Invescpro, at least 30 percent of all items ordered online are returned compared with 8.89 percent at brick and mortar stores. This is an issue for a number of reasons. Apart from the supply chain costs associated with returns, frequently these products can't be resold at the original price because of damage, wear or obsolescence. At the same time, Spotify (27 February 2019) reports that 90 percent of consumers 'highly value' free returns. 62 percent 'would buy again' from a brand offering free returns or exchange and 69 percent are deterred from buying online by having to pay for return shipping. What implications does this have for the service you are able to provide and associated costs?

It is interesting to note a comment in the Forbes article that 'some digitally mature brands are starting to experience an unsustainable rate of returns that has been a huge motivation for opening their own brick and mortar locations'. We have recently witnessed a number of examples of this move and it is also interesting to note the comment that 'it turns out that not only is it typically cheaper to handle returns in a physical store but consumers often make incremental purchases when they come in'.

So what lies ahead? Wherever you look online sales are growing and this is particularly true of individual market sectors that involve digital content, but let's put this in perspective. The significant majority of sales still take place at physical outlets and will (according to all credible forecasts) continue to do so for the foreseeable future. As people's behaviour changes so business has to adapt to reflect these changes. It is those who successfully adopt an omni-channel approach to customer service, including in-store, who will best meet the needs of a diverse customer base.