Online shopping will account for more than 50 per cent of retail sales (up from 19% currently) in the next ten years according to a new report, The Digital Tipping Point.
Commissioned by law firm Womble Bond Dickinson (WBD), the report reveals that this growth will be powered by three primary factors: the changing demographic of the UK adult population, the development of faster, 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.
As the UK adult population evolves over the next decade the shopping habits of younger groups will become more dominant. The research conducted by Retail Economics showed that 62 per cent 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/brands compared with just 3 per cent of those aged over 65. This reveals how much more online marketing impacts younger adults. However almost a quarter of Gen Zs also said they are more likely to go shopping in high streets and shopping centres highlighting the complexity of the customer journey and the importance of shopping experiences for these younger consumers.
The top three factors that would accelerate online shopping for consumers are cheaper (47%) and faster (26%) delivery and easier returns (26%) all of which are key areas of investment for retailers looking to own more of the digital market. Again, easier returns are more important for Gen Z (28%) and Millennials (30%) than any other age group highlighting their significance as dominant consumers in the future. In addition to this, there is a rising trend of in-home deliveries (deliveries while homeowners are out) which is expected to grow.
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. Indeed 10% of consumers say they will shop less in physical stores in the next 12 months outweighing those who suggested they will shop more frequently in-store.
Gavin Matthews, Head of Retail at Womble Bond Dickinson said, "online retail is being driven on apace due to a combination of factors and early adopters in the retail market who can flex and adapt their business models quickly will rise to the top. However, as retailers leverage new technologies to support this growth, new risks also emerge. Consumers are increasingly conscious of the need to protect personal data and their privacy in order to reduce the risk of fraud, identity theft and misuse of their data. Real damage can be done to a retailer's brand and reputation with any data breach and loss of trust can have far-reaching consequences for any business and its bottom line."