The Digital Tipping Point: 2019 Retail Report

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Report highlights

The retail industry is undergoing a period of unprecedented change, fuelled by the rapid and ongoing transition from analogue to online, the growing importance of experiences and heightened consumer expectations. Cumulatively, these powerful factors have unveiled a very disruptive digital age.

Seismic shifts have fundamentally changed the way consumers research, purchase and consume products from retailers of all sizes, types and across all channels.

An array of varied touch-points influence, enhance and intelligently ‘nudge’ shoppers through an ever-expanding number of paths to purchase, from increasingly personalised social media campaigns to stockless stores where merchandise is viewed through augmented reality apps.

Disruption, technology and the online revolution

Today’s consumer journey is truly unrecognisable from the analogue path of the previous decade, and we expect to see the rate of change accelerate in the next ten years as technological innovation shifts the balance of power from the retailer to the consumer.

New and emerging technologies will empower further online growth as artificial intelligence and 5G dovetail to enhance retailers’ capabilities for speedier and cheaper online fulfilment, including in-home delivery.

Meanwhile, innovative new retail business models will emerge. Subscriptions, auto-replenishment and fewer, experienced focused stores, will drive online sales to heights where online sales will become the largest channel within the next ten years when, ultimately, a tipping point will emerge.

We expect to see the rate of change accelerate in the next ten years as technological innovation shifts the balance of power from the retailer to the consumer.

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The Digital Tipping Point: 2019 Retail Report

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Figure 1: Online expected to account for 50% of retail spending within 10 years


Retail challenges and opportunities in the information age

This digital disruption will create significant challenges for the retail industry. For example, the role of the store will evolve from mere product distribution hub to a meaningful customer experience environment, offering discovery, entertainment and escapism. The experience economy is well and truly upon us.

Retailers are eagerly adopting new technologies to leverage new opportunities. However, with new opportunities comes new risk and new unknowns. Consumers are increasingly conscious about their data protection and their privacy in order to reduce the risk of fraud, identity theft and the misuse of their personal data.

Moreover, consumers also expect companies to be transparent about the data they hold on them, what they use it for, and how they protect it.

With Gen Z and Millennials expected to form the majority of the adult population in the next ten years, we forecast that online will account for more than 50% of all retail sales by 2028, and retailers must carefully consider how they will operate and adapt to a scenario where potentially half of their sales will be driven by the online channel.

Figure 8: Frequency of online shopping by age

“We forecast that online will account for more than 50% of all retail sales by 2028.”

A more in depth analysis is covered in the full report, which unearths insights concerning the causative forces driving the digital customer journey and reveals stark differences across consumer segments.

Various push and pull factors operate throughout our timeline, each wielding both predictable and unpredictable impacts upon our assumptions and overall estimate.

10 key principles underlying the drive to online dominance

From the myriad of issues influencing our forecast of digital domination, our research identifies 10 principle reasons why this is so.

Looking at the past, present and future, these ten reasons address the backdrop to the digital disruption, the main reasons online growth will be pushed further, and how businesses are reacting to stay relevant as the digital dawn rises.

1. The customer journey evolution

2. The evolution of online spend

3. Importance of age for category penetration

4. Increased pace and spend of online

5. Increasing significance of Gen Z and Millennials

6. Faster, cheaper in-home deliveries

7. Fewer stores drives consumers online

8. Better connectivity and more powerful devices

9. New retail business models

10. The rise of AI

Our full report contains an analysis of each reason in turn, presenting proprietary data where appropriate, supported by analysis to provide a holistic understanding of our headline forecast.

Retailers seizing opportunities and managing risks

Digital transformation is not only disrupting the consumers’ path to purchase, but is also making businesses consider how they operate and manage risk.

The priority will be to focus on strategic transformation to pivot business models so they do not fall victim to the speed of change. The shift to online presents a particular challenge to traditional stores as the performance of physical assets becomes increasingly polarised.

Successful retailers have always had to reinvent themselves to remain in the game. However, the sheer pace of this change will inevitably claim some victims. While the impact of future technologies and consumer acceptance carries uncertainty, it feels like the digital retail-revolution is only in its infancy and that ultimately, a tipping point will emerge.


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