E-commerce: is there any future for traditional shopping?
E-commerce has disrupted the retail industry dramatically over the past decade. Global retail e-commerce sales exceeded $5.7 trillion in 2022 and are projected to continue rising rapidly in the coming years. E-commerce now accounts for 18% of all retail sales worldwide, and that share is expected to grow to 21.8% by 2024. The number of online shoppers is also set to increase, with estimates of 2.71 billion online shoppers in 2024 and 2.77 billion in 2025. The COVID-19 pandemic accelerated e-commerce adoption, as consumers shifted online to meet their shopping needs during lockdowns.
However, in-store shopping still comprises the majority of retail sales. In 2020, brick-and-mortar stores generated $18.58 trillion in sales, which accounted for 82% of the total retail spending.This was a significant decrease from 2019, when brick-and-mortar sales reached $4.184 trillion.However, in 2021, brick-and-mortar sales grew by 8.2%, reaching $21.094 billion, and were ahead of spending during pre-pandemic 2019. Many consumers still prefer the tangible, social aspects of in-store shopping like seeing, touching products, and receiving face-to-face service. A 2023 survey found in-store shopping remains the preferred channel for 43% of consumers.
So while e-commerce is growing quickly, physical stores continue playing a major role. The question remains whether in-store shopping can survive and compete with the convenience and personalization of e-commerce over the long term, or if online shopping will eventually dominate the retail landscape.
Why We Can't Resist Online Shopping
E-commerce has become extremely popular largely due to the convenience and benefits it offers consumers. Shoppers can now access a huge selection of products and services from all over the world at any time, without leaving home. This saves time and money spent on driving, parking, and waiting in lines. For example, Amazon Prime's subscription service providing free fast shipping and other perks has attracted over 200 million members globally and saw a 28% revenue boost in 2020.
Additionally, consumers can find niche, rare, or internationally sourced items online that would be difficult to find locally. Global marketplaces like Amazon, Alibaba, and eBay give access to different cultures, brands, and international inventory. In 2022, Alibaba's two Chinese shopping apps had over 900 million active buyers, with Taobao being the most popular.
The ease of price comparisons and crowd-sourced reviews are other advantages. Consumers can compare deals across vendors and learn from other buyers' experiences through ratings and reviews. TripAdvisor, a travel review site visited by 463 million people monthly, heavily influences most users' decisions.
Finally, personalized recommendations and customization options are major perks. Using purchase history and browsing data, shopping sites can suggest relevant products and services matched to consumers' tastes and needs. Streaming services like Netflix, which accounts for 15% of internet traffic with over 200 million subscribers, offer recommendations based on viewing habits. Overall, online shopping provides convenience, selection, affordability, and personalization.
That Old Familiar Place: Why We Still Love Shopping IRL
While e-commerce offers many benefits, brick-and-mortar stores still attract a large, loyal customer base who appreciate the tangible, experiential nature of in-store shopping. One major reason people still prefer physical stores is the ability to evaluate products firsthand before buying. Shoppers can see, touch, taste, or try items to assess quality, fit, function, and suitability to their needs. In-store shopping also avoids online risks like shipping fees, delays, damaged goods, and the hassle of returns. According to a Retail Dive survey, 62% of consumers cite the desire to physically examine products as a reason to shop in-store, with 49% noting the wish to avoid shipping costs.
Another advantage is the face-to-face customer service from store staff. Shoppers can ask questions, seek advice, request demos, and get recommendations from employees with specialized knowledge. There is also a social, emotional benefit to interacting with welcoming, friendly store personnel. Per a PwC survey, 74% of global consumers want more human interaction when shopping.
Lastly, consumers appreciate the ambiance and experience of physical store environments. They can immerse themselves in aspects like music, lighting, scents, and displays that influence their mood and decisions. In-store shopping also offers the fun of discovering new items, browsing different sections, and finding deals. A Mood Media survey found 78% enjoy in-store shopping for the atmosphere, with 90% more likely to purchase when they like the music, smells, and visuals.
Getting the Best of Both Worlds: Retail's Omnichannel Revolution
Retail is changing. As consumer preferences and behaviors shift, an increasing number of retailers are adopting omnichannel strategies that integrate both physical and online shopping channels into one seamless experience across platforms and devices. This omnichannel approach allows retailers to leverage the best features of brick-and-mortar and e-commerce models. And it aims to provide more convenience, selection, and personalization for the customer.
Take Starbucks as an example. The wildly popular coffee chain has woven together brick-and-mortar cafes, a feature-packed mobile app, and delivery service options into an omnichannel whole. Starbucks’ mobile app alone boasts over 31 million monthly active users. And Starbucks attributes a full 41% of its total U.S. sales revenue to members of its rewards program. By integrating in-person and digital platforms so effectively, Starbucks has achieved industry-leading customer engagement and sustained sales momentum domestically.
Retail giant Walmart tells a similar omnichannel success story. Walmart provides its over 268 million customers a customizable mix of instore shopping, online ordering, curbside pickup and home delivery. Shoppers can fluidly switch between purchase channels and fulfillment methods to suit their needs. This strategic focus on omnichannel convenience helped Walmart grow its e-commerce sales an incredible 63.5% in 2021.
Beauty brand Sephora has also built an exceptionally loyal following through omnichannel integration. Sephora’s stores, website and virtual try-on app together enable customers to access products, test looks, get advice and purchase items. With over 31 million loyalty members generating most of its U.S. sales revenue, Sephora enjoys outstanding customer retention thanks to its omnichannel ecosystem.
Industry research confirms the meteoric rise of omnichannel strategies. Fully 73% of today’s shoppers now use multiple retail channels and touchpoints during their consumer journey, according to Hitachi Solutions. And a Harvard Business Review analysis of 46,000 consumers found they “love to shop in all sorts of combinations and places” – underscoring the growing importance of consistent omnichannel experiences.
What's in Store for Retail's Next Era
The retail industry is constantly evolving as new technologies, consumer trends, and demands emerge. In the coming years, retailers are expected to focus on providing more personalized and mobile shopping experiences, adopting sustainable practices, and utilizing emerging technologies to transform shopping.
Consumers increasingly want customized recommendations, offers, and experiences through mobile devices. Retailers will likely invest more in platforms that enable personalized, mobile-friendly shopping. For example, Shopify, an e-commerce platform, now has over 1.75 million merchants using its services and increased revenue 86% in 2020.
Consumers also want businesses to adopt more sustainable practices like renewable energy, reduced waste, ethical sourcing, and supporting social causes. Brands like Patagonia, known for environmental activism, are leading this trend. Patagonia donates 1% of sales to environmental organizations.
Finally, consumers expect immersive, interactive experiences leveraging augmented reality, virtual reality, and artificial intelligence. Retailers can create more engaging environments and responsive customer service with these technologies. IKEA’s AR app, which lets customers visualize products in their homes, has helped increase the company’s online sales as they adapt to this demand.
Physical vs Digital: Can Retail Have It All?
Physical stores and online shopping both play vital roles in the retail landscape, appealing to different priorities and preferences among consumers. Brick-and-mortar stores continue to attract those who value tangible interactions - testing products firsthand, enjoying personalized service, and immersing themselves in an engaging in-store setting. E-commerce provides innovation and convenience for shoppers who prioritize choice, price comparison, and customized recommendations.
Omnichannel retailing blends these models effectively through integrated online and offline capabilities. This approach yields valuable consumer data, heightens convenience, and promotes loyalty. Emerging innovations around personalization, mobile technology, sustainability, and more will further reshape shopping down the road.
Going forward, traditional retail's future depends on adaptable, creative brands that keep pace with consumers' changing needs. Purely physical stores may fade over time, but thoughtfully transformed spaces can retain relevance. Ultimately, consumers will determine the ideal equilibrium between in-person and digital, weighing each channel's upsides and downsides. Retail will remain vibrant if retailers listen carefully and chart an omnichannel course that adds value.
