Mega Trends such as connectivity and convergence are expected to change the face of the retail industry, allowing retailers to merge the digital, virtual and physical into a single "bricks and clicks" model. This integrated channel will become the norm of the future, likely to be deployed by every retailer by 2025. Brick and mortar retailers are already enhancing IT infrastructure and logistics to widen their online presence and tap this growing market.
New analysis from Frost & Sullivan, Bricks and Clicks, finds that online retail revenues will reach USD4.3 trillion in 2025, accounting for nearly 20 percent of total retail. In leading markets like the United States and the United Kingdom, nearly 25 percent of retail will be online. Online retail is also growing faster than traditional channels in countries such as Japan and South Korea.
The media and entertainment segment will witness the highest online sales penetration – 82 percent – by 2025, especially with the advent of platforms such as iTunes, e-readers, and Netflix resulting in a huge shift to digital.
"The proliferation of connected devices and the availability of faster internet speeds have catalysed a change in shopping behaviour and fuelled market expansion," said Frost & Sullivan Visionary Innovation Research Group Analyst Archana Vidyasekar. "Innovative business-to-consumer logistic models and the growing influence of social media, along with the convenience of online product research, comparison shopping and competitive pricing, have helped convert many online browsers to online shoppers."
The fast pace of urbanisation is further transforming brick and mortar retailing from big-box to small-box formats. By 2020, retailer store sizes will shrink by 15-20 percent. Several retailers have unveiled plans to experiment with small mobile or express stores ranging between 10,000 and 60,000 square feet in size. Other new retailing modes like interactive stores, click-and-collect, social commerce and virtual stores are imminent as retailers look to extend customer touch points.
The virtual store, in particular, is an excellent example of a bricks and clicks model that has effectively leveraged emerging technologies like augmented reality. Retail giants such as Tesco have found success with virtual stores in countries like South Korea where smartphone penetration is extremely high. The company’s online sales increased by 130 percent within months of the launch of its virtual store home shopping app, which is also the most downloaded app in Korea.
"Virtual stores are being introduced in transit zones such as subways or airports and as virtual posters on buses and stalls, highlighting its importance to the future of global retailing," observed Vidyasekar. "As similar on-the-go shopping models rapidly become popular, traditional credit cards and paper currency will give way to more convenient, easily-available mobile payment channels."