In a bid to grow their online profiles, traditional retailers often forget to take into account the kind of liability that physical stores present in the face of declining offline sales. A study conducted by Strategy& analyzed the effect of online sales on physical sales area as well as offline sales in four different categories including Apparel, Toys and Games, Consumer Electronics and Appliances, and Health and Beauty. The study report also made recommendations on what retailers can do to plan an effective retail footprint for 2020.

The effect of online sales on offline sales

Despite the downturn of the economy in Netherlands, online sales continue to boom. With the gradual disappearance of barriers of online shopping, consumer adoption rates are showing a gradual increase. Returns and free delivery are increasingly becoming popular and with the current trend, the two could become standard service provided by online retailers in the near future. Augmented reality technologies have allowed for alleviation of problems like inability to test products before purchase. Ironically, some service propositions that were initially meant to alleviate problems affecting online shopping are now problematic to offline shopping.
The analytic study conducted by Strategy& showed that online sales in Netherlands are expected to increase by 18% from 9% while offline sales are set to decline by 17% due to the rapid growth of online sales. Toys and Games are expected to show the highest growth from 17% in 2012 to 50%+ by 2020.

Implications of E-commerce on stores

Rapid online growth will cripple the growth of offline sales. The traffic for stores will decline especially in peripheral shopping areas with big box retailers. A new trend simply known as ‘showrooming’ which involves consumers ordering products online and checking them out at the store is quickly emerging. By 2020, 2.0-2.5 million square meters in urban sales areas are expected to become redundant. On average, this accounts for 17%-21% of the current sales area.

Store formats of the future

Given the gradual changes, retailers should consider building connected stores and developing virtual & physical footprint for 2020. The footprint should account for store productivity management capabilities, digital technology solutions, new store formats and location management. Customers’ needs continually changing and the result is a variety of roles that retailers are required to fulfill to provide a seamless shopping experience. Store formats to invest in for the future include

• Flagship stores in both large and small cities
• Temporary flexible stores to create a buzz including pop-up stores and mobile stores
• Virtual showrooms
• Pick-up and drop-off points

Yogesh Huja, Founder
Freedom Smart Labs Pvt Ltd
An Internet of Things Innovation Company