Retailers and the Digital Sales Switch

retailersBricks and mortar retailers must develop an online presence if they want to keep hold of customers that are steadily drifting online.

A Study by the US National Retail Federation found that 59 percent of shoppers plan to make online purchases this year. If they do, it would make 2017 the first year that e-commerce sales in the United States overtook their bricks and mortar counterparts.

According to retail analyst Fung Global, there have been a record 6,735 store closures in the United States this year. That’s more than three times the number of stores shuttered in 2016. There have been 620 bankruptcies in the sector, including the likes of Toys R Us, Gymboree, and RadioShack. In its annual report, Sears even said there was a “substantial doubt” that it could remain in business.

The comparison with online sales couldn’t be starker. US retailers raked in a record $7.9 billion in online sales on Black Friday and Thanksgiving, up 17.9 percent from a year ago, according to Adobe Analytics, which measures transactions at the largest 100 US web retailers.

Online retailers in China have also just had their own record-breaking moment. Single’s Day sales was a hit at a massive $25.4 billion. In the Middle East, Souq.com introduced White Friday to our region in 2014. They claimed this year to have offered 500,000 deals on 16,000 brands, with discounts of up to 70 percent.

Also, other leading e-commerce players in the region have adopted it including Noon, Wadi, Namshi, Sivvi, VogaCloset and others. Traditional mall retail groups in the Gulf, who have online operations, are doing White Friday sales, too, including Al Tayer Group, Emaar Group, Landmark and others.

So e-commerce appears to be steadily killing-off physical stores. Or is it just pushing aside the ones that don’t have their own strong online presence and strategy? Does the word ‘killing’ really apply when retailers close down physical stores, smartly setting up ‘storage’ operations instead and shifting sales operations online? This could actually maintain and possibly even boost their profits.

A more accurate statement would be that e-commerce is causing a digital transformation in shopping, with some retailers harnessing the technology to grow their business, while others are missing out and withering away.

This brings us back to the possibly bright side, demonstrated by the emerging opportunities for retailers. While many physical stores are closing, the National Retail Federation says that nine out of the top 10 web retailers in the United States have their own brick and mortar stores. That shows that they are making the switch.

Retailers who understand the psychology behind the two distinctly different behaviors of shopping and buying, will win in this transformation. Marketing guru Seth Godin summed it up best when he said: “Retailers everywhere forgot the real reason we need stores … there’s something about the shopping that’s almost as good (or even better) than the buying part. The buying race is over, Amazon won. The shopping race, though, the struggle to create experiences that are worth paying for, that’s just beginning.”