Glynn Davis is one of the UK’s most knowledgeable and experienced retail journalists, founder of Retail Insider, and Ecommerce Age’s new monthly columnists.
Around 15 years ago a retail executive suggested to me that it must be difficult to find any positive stories on the industry as shops were closing as a result of the dreaded internet. They had somehow managed to completely miss the point at that time and over the intervening period have been proven to be increasingly half-witted as the online channel has grown into the shining beacon of hope in a sector where many operators have sadly been running aground.
Covid-19 certainly ignited the pace of sales shifting from physical stores to online but this underlying trend had been evident for many years – albeit with some naysayers en route arguing various product categories have been unsuitable for selling online.
They questioned who would want to buy clothing online? And then who would buy big-ticket items online? Who would buy health & beauty goods online? Who would buy food online? Who would buy luxury goods online? Resistance to all has ultimately fallen away and arguably the last standout, luxury goods and its close cousin fine art, are increasingly being purchased through online stores and even digital auctions.
With ecommerce now very much open to all product categories this digital space is an incredibly exciting place to be and a world away from old school retailing. One of the big themes is how new digital models are replacing outdated physical versions. This has been particularly evident with department stores. The physical variant of these house-of-brands venues have had a torrid time with BHS, Debenhams and House of Fraser pulling the shutters down while John Lewis is to close a number of its department stores and repurpose its flagship Oxford Street outlet.
In the place of these brick and mortar behemoths we have seen the emergence of the online marketplace model. Amazon and eBay originally set the pace but recently we’ve had a plethora of other players entering the market selling brands within specific categories. For clothing Zalando and Next have switched their focus to building asset-light, relatively high-margin platforms. On these they can sell third-party brands for a decent fee without even having to handle the actual products. Others include Farfetch, which specialises in luxury fashion brands, and we even have marketplaces like StockX for sneakers.
Another cohort of marketplaces are tapping into the sustainability dynamic, including TheRealReal, ThredUp and Depop, by selling used goods (or vintage/pre-owned, if you prefer). These form part of the ‘recommerce’ phenomenon that is another particularly exciting part of the ecommerce industry, which promotes the circular economy. The godfather of used goods marketplaces eBay found 81% of British customers had bought second-hand goods in the past year and 32% sell such items because of the positive environmental impact.
With such competition online for products of all descriptions, margins are invariably under pressure and this has led to the rise of the DTC (direct-to-consumer) model. This puts the power in the hands of the brand owner rather than any third-party middlemen – including retailers. The likes of Nike, Adidas, Dyson and other powerful brands are adapting their models to sell exclusively on their own websites (as well as their physical stores) to ensure they maximise their margins as well as controlling the supply of the most coveted, limited run products. They can also control the quality of the selling environment.
DTC has not just been about big brands but is also the focus for a plethora of small newcomers who from day one have sought to predominantly sell on their own websites. This might be complemented by also selling some items through a select number of third-party retailers. Such a strategy also enables them to own the relationship with the customer and retain all the valuable customer data that this generates. This is becoming the lifeblood of any online retailer and is the driver of personalisation.
Using data to personalise the interactions and engagement with customers – based on their behaviours, preferences and previous shopping activity – is the new battleground in ecommerce. It is particularly exciting because it is leading to something of an arms race where the heavy artillery, with sniper precision in this case, is AI (Artificial Intelligence).
This looks set to be an increasingly important part of the ecommerce landscape for retailers in the years ahead as they tool-up with the latest cloud-based technologies. In doing so they further highlight how seriously off the mark that executive was a decade and a half ago. They not only missed the point but also no doubt missed the boat too.