TV was supposed to kill cinema, so was the VCR, so was DVD, so was online and downloading movies. Yet cinema has survived, and in fact has thrived. I walked over the park to our local cinema this morning and watched as my children were enthralled in the latest Pixar offering. Now there’s a clever use of new technology for you. Multiplexes have redefined how we watch movies, using new technology themselves, with digital formats and sounds, and the return of 3-D.
The message I suppose is that new technology, even disruptive technology, need not kill an incumbent. Sometimes it can, sometimes they coexist and both can have a fine future.
I believe the same goes for retailing. Shopping is as much a social activity as a necessity of life, and not everything can be bought as elegantly or satisfactorily online as it can from the local shop. I love the fact that I bump into someone I have not seen in a while at the shops, or have the opportunity to take my young ones out hand in hand for some Daddy time.
Online retailing in Australia is about 5% of total retail, worth about $13bn, and growing at 16% a year. In the UK it’s 7%. WA has the 3rd largest spend in online retailing per person in the country, after NT and ACT, but WA’s online retailing is growing at a faster rate than all other States (over 30% in 2011). This is probably due to the remoteness of the State and our relative affluence.
Online retailing varies across industry sectors: for computer hardware and software it’s 60%, books 37%, sports 11% and small electricals 10%. Whereas groceries and bulky goods have had the smallest impact from online shopping.
When you consider that 80% of Australians live within 7 minutes of a shopping centre, you have little wonder why traditional retail is still 95%. There is no mail order culture here (as opposed to the US), and large distances make for large freight costs. However, the lure of online shopping is there, with its lower prices, no parking or congestion concerns and no pushy sales people or poor in shop service experiences. Books are 58% cheaper online than at the local book store, computer software is 44% cheaper. There is so much choice online, and you can read reviews and crowd source your shopping options (facebooking “Hey, what do you guys think of this?”).
Forecasts show that by 2020 online retail will have grown by $28bn to $41bn, or (still only) 12% of total retail. However, by those numbers offline retail is set to grow by $55bn over the same period, so is hardly going away. In fact there is more cake for everyone. Indeed, not every online sale even completes online – buying a groupon voucher for a restaurant still involves you eating at the restaurant; a haircut probably has to take place at the barbers. Which is comforting, for despite my love of online business, pottering around the shops is something I think I will enjoy doing well into my eighties.
Statistics from URBIS
I’m of the same opinion Chaz. I suppose the same perception of threat on print news media (or print media in general) by digital news can be overcome with technology and both coexist. By the way recently I purchased MS Office suite from HM in store and they matched the online price which was $80 cheaper. There you go, not only I got the price I wanted but also out & about experiencing the world.
Charlie, great summary. Retail shops and shopping centres will always be there however they will undoubtedly be affected signficantly by the fact a smart phone, ipad and computer are all now world wide shopping centres, making it so easy to bring anything you want to your doorstep. I’m interested to see whether food based neighbourhood Centres will thrive as we still need to food shop or whether the large super regional centres filled with discretionary retail and entertainment will be the ones to thrive the most when online shopping impacts further.
Hi Charlie, compliments on a succinct over-view of why retail will survive. Much more balanced than anything we are seeing in the main stream media. As you say retailing will always prevail because much of the retail spend is from a households “recreation” budget. Market forces are reacting to this with shopping centres limiting the number of book and music outlets and replacing these with coffee shops, upmarket produce etc. Now all we need is for the rapacious shopping centre owners to realise their “rent seeking” is taking place within a globally competitive market and SME retailers will again be happy!