Current eCommerce trends in consumer buying

Are retail storefronts going the way of the dinosaur? The quick answer is—probably not in this century—but there is no doubt that the way consumers shop is changing, and eCommerce is the way of the future.

On March 17, 2017, the Commerce Department reported that online retail has been soaring—14.8 percent in Q1 year over year—even as sales at brick-and-mortar retailers, led by department stores, have gone into a tailspin.

A report published by BigCommerce with 141 Stats Revealing How Modern Customers Shop in 2017, shows that 51 percent of Americans prefer to shop online. Surveys also show that 67 percent of Millennials and 56 percent of Gen Xers are on the forefront of this shift to online purchases for their every need.

If you are a developer of retail centers, you may be stressing over the reports, from Wall Street and in the business section of the local paper, that major retailers are closing more than 4,000 stores in 2017.

In June of this year, Sears announced the closing of 16 Sears, 49 Kmart, and seven auto centers across the country. This latest announcement is in addition to the more than 180 closings that were announced earlier this year. The closings will bring Sears’ store count to about 1,200, down from 2,073 five years ago.

In addition to Sears, the list of closings reads like the who’s who of retail:

  • J.C. Penny – 138 stores
  • Radio Shack – 1,000 stores (leaving them with just 70 locations)
  • Macy’s – 36 stores
  • Gymboree – 350 stores
  • True Religion – 27 stores
  • Payless ShoeSoruce – 512 stores
  • Michael Kors – 100 to 125 stores
  • Bebe – 180 stores
  • Rue21 – 400 stores
  • Abercrombie & Fitch – 60 stores
  • Guess – 60 stores
  • Crocs – 160 stores
  • The Limited 250 stores
  • Wet Seal – 171 stores
  • American Apparel – 110 stores
  • BCBC – 120 stores
  • Hhgregg – 220 stores
  • Game Stop – 150 stores
  • Staples – 70 stores
  • CVS – 70 stores
  • Family Christian – 240 stores
  • Ascena Retail Group – 268 stores (Ann Taylor, Loft, Dress Barn, Lane Bryant, Justice, etc.)

While a few of the companies are closing due to bankruptcy proceedings, nearly all of the stores are citing “weak foot traffic” as the reason for closing.

Greatly impacting the brick-and-mortar storefront sales are online companies like Amazon.com, Zappos, and Wayfair. To survive many retailers, like Radio Shack, are gearing up to compete head-to-head by creating their own online presence. Sears, on the other hand, has decided to team with Amazon and has inked a deal to sell its new line of Kenmore “smart appliances” on Amazon.com. The Kenmore smart appliances can be synced with Amazon’s voice assistant, Alexa, allowing users to control them with the sound of their voice.

In addition to working with large corporations, Amazon has started a program to work with small mom and pop operations to expand their online presence and sell more inventory.

Part of Amazon’s success is the fact that aside from the Kindle and Alexa, Amazon does not manufacture products and, for the most part, does not warehouse inventory. Amazon relies on just-in-time shipping from its suppliers. When Amazon first started, they relied on UPS and FedEx to deliver their packages. However, in recent years, Amazon has built their own distribution facilities, bought a fleet of airplanes, and in 2015, the company formed Amazon Flex, using private drivers to deliver Amazon Prime packages. In 2016, Amazon expanded the Amazon Flex service to all packages using contract drivers who use their own vehicles and work as many hours as they want. In 2015, Amazon generated $136 billion in revenue.

Of course, the contract driver concept became popular when UBER began the business of organizing the ride share concept. In 2011, UBER made a big splash in San Francisco by letting customers hail a car with their smartphone. Today UBER operates in nearly every major city in the U.S. and 58 countries. While they have recently suffered management issues, they still managed to show revenue of $6.5 billion in 2016.

Following on UBER’s success, Lyft started in 2012. While Lyft still struggles to get a foothold against its competitor, only serving 300 major U.S. cities, they managed to close our 2016 with $700 million in revenue.

While UBER and Lyft have small hiring and training offices in each city, they maintain only a minimum of full-time staff. Each driver is an independent contractor using their own vehicle and smartphone, maintaining private auto insurance and business license, to compete head to head with local taxicab companies.

Southern Nevada Taxi companies are feeling the effects. In May 2017, the Nevada Taxicab Authority reported a 12.61 percent decline in ridership during the first four months of 2017 compared to the same period last year.

But while some businesses fear this new model of business, other businesses are embracing the technology to expand their business. Many restaurants are contracting with UBEREats, Seamless, Grubhub, DoorDash, Postmates, or Yelp’s Eat24 to deliver takeout orders to customers instead of hiring their own delivery personnel.

However, according to one analyst, the on-demand delivery business is difficult as the cost of paying the couriers is greater than the money generated from delivery fees. Analytics show the minimum breakeven point to be a $50 order. But despite the challenges, Grubhub reported revenue of $493.3 million in 2016 (up from $361.8 million in 2015). Postmates generated $250 million in 2016.

In the case of food delivery, there is a symbiotic relationship that seems to be beneficial to the retailer, the customer, and the delivery company.

The key to the success of this modern internet and smartphone app based commerce is perceived value and convenience. How much is it worth to have your Subway sandwich delivered for around $9, including tip, when you could have picked it up at the sandwich shop for $5.

But not everything ordered through the internet is more expensive. Wayfair, which sells household items, offers bargain prices on the same quality products that you would find in the local furniture store, and they offer free or inexpensive delivery. In 2016, Wayfair reported a 50% growth in net revenue of $3.4 billion and a 54% growth in active customers at 8.3 million.

Major retailer players from both sides of the aisle are pushing hard to expand their presence both online and in-store. Just this month, Amazon made a major move in spreading its physical presence with the purchase of Whole Foods, thereby seeking to reinvent the retail customer experience with its supply chain, logistics, and customer service prowess. Walmart is stepping up its efforts in the online world with its announcement of an acquisition of online retailer Bonobos on the heels of its earlier purchase of online women’s apparel retailer ModCloth in March.

In short, brands with a brick-and-mortar presence tend to offer a more touch and fee personal customer experience versus their online-only competition, but they often fall short on convenience and inventory selection availability. However, through an integrated approach, these same retailers can deliver the accessibility of online shopping and the advantage of personalization, tailored advice, and support in product fulfillment when products are out of stock or unavailable.

Brick-and-mortar stores are not going away, but the way they do business is rapidly changing. Is your business keeping up with the changing technology?