The Impact of eCommerce on Retail

Not that long ago, when you wanted to buy a product, the obvious move was to get in your car (or hop on public transit) and head to one of the stores in your town. 

Now, it’s just as natural to pull up a website any time of day to buy just about anything you could want. eCommerce has impacted every part of our lives. It’s changed total industries and caused huge shifts in buying behavior. 

One of the biggest areas that has been impacted by eCommerce is the retail industry. 

Before buying items online was an option, almost all shopping had to be done by going into a physical store, browsing, and buying the specific items you wanted. Granted, there were also catalogs and home shopping networks. But for most people, the obvious option anytime you wanted to purchase a new item was to head to the local mall or shopping center.

The internet changed all of that. And eCommerce has only been growing in influence and popularity in the time it’s been on the scene. 

eCommerce’s Impact on Retail By the Numbers

To start to understand eCommerce’s impact on retail, it helps to look at the statistics that measure growth, declines, and other trends in each. 

Online sales overtook in-store ones for the first time in 2019.

While the difference between the two was minor, a report from the Commerce Department noted that February 2019 was the first month that online sales beat those of retail stores. 

What they called 'non-store retail' sales-meaning sales through a website rather than a physical storefront-accounted for 11.813% of all sales that month, as compared to 11.807% for brick-and-mortar retail.

Even though the numbers are close, it was an important moment for marking the shift in consumer habits. People haven’t abandoned the physical shopping experience by any means, but the share of shopping they do online has grown to be comparable to the amount they do in-store. 

The number of retail stores was growing until recently.

For most of the time eCommerce has been an option, the retail industry was still growing. Contrary to what some may have assumed, online stores didn’t sound the death knell for traditional retail. 

Instead, Neilsen’s data shows more than 27,000 new retail stores opened between 2007 and 2018 in the United States. The industry didn’t see any slowdown until late 2017, suggesting that even as eCommerce sales grew, brick-and-mortar stores were still making profits.

The average size of retail stores has decreased. 

While the number of stores grew, they started to get smaller. Nielsen notes that the rapid growth was primarily in small-format stores like convenience and drug stores, rather than large retail locations. 

The average square-footage of retail stores has dropped 4.4%, from 10,516 in 2009 (its biggest year) to 10,051.

Certain types of retail stores are disproportionately hit by eCommerce competition.

The term retail includes a lot of variety-dollar stores, pet stores, the auto industry, and electronics, just to name a few examples. 

The impact of eCommerce on retail is not consistent across store types. Consumers have primarily shifted to shopping online for a few types of items in particular.

Nielsen’s research found that consumer electronics was the hardest hit with 6,507 fewer retail stores between 2007 and 2018, followed by apparel with 4,630 less. On the other end of the spectrum, the number of dollar stores increased by 12,535, convenience stores by 6,943, and drug stores by 4,296. 

Retail is increasingly omnichannel. 

When we talk about eCommerce and brick-and-mortar stores as two different things, it’s accurate, but obscures the fact that there’s a lot of overlap. 

Some of the biggest eCommerce businesses-think Walmart, Target, Home Depot-are also some of the biggest traditional retail brands in the country. Many brands that sell physical products have seen the value of doing both-letting people choose between a visit to a store, buying items from their living room, or doing a combo of the two.

According to Business Insider, 68% of consumers say they’ve taken advantage of the option to purchase an item online and pick it up in a store (often called 'click and carry'). Customers increasingly expect brands to deliver a seamless experience in which the distinction between the eCommerce side of a business and the brick-and-mortar is collapsed. 

Generational differences impact eCommerce vs retail choices.

Consumers aren’t all alike in their shopping preferences. Statista’s data shows clear generational trends in who shops more online, and who heads to the store for most of their items.

67% of millennials prefer eCommerce, as compared with 56% of Generation X, 41% of boomers, and only 28% of seniors. That suggests that eCommerce’s impact is much more significant for consumers of some ages than others

10 Other Ways eCommerce Has Changed Retail

Those numbers don’t tell the whole story though. The rise of eCommerce has changed a lot about how customers think about shopping and what their everyday shopping behaviors look like. There are at least ten other important ways eCommerce has had an impact on retail. 

1. Customer expectations around convenience

Buying a product online is easy and efficient. You don’t have to deal with traffic and parking. You don’t have to figure out the best bus route. You find the item you want and with a few clicks, it will come straight to you.  

Customers are now spoiled for convenience, and that changes our idea of normal. If anything about the process of buying products from a retail company makes it feel hard-an item is out of stock and won’t be available that day, or the lines are long because your store is understaffed-they won’t be holding the store to the standards of the typical retail experience. They’ll be comparing the inconvenience to their experiences with the future of eCommerce shopping.

That makes it that much more important for both online stores and brick-and-mortar ones to up their game to improve customer satisfaction and experience. 

2. The ease of doing advance research on products

The internet makes it easy to find detailed information about almost any product a customer could consider buying. 

They can compare prices, see what third-party sites have to say about products, and learn about the company behind them. If a retail brand experiences a scandal, there’s no hiding it. If a new brand in your space starts to undercut their prices, customers have an easy way to learn about it. 

That all increases the importance of consistently providing high-quality customer service, and striving to run a business that’s above board. When someone goes Googling to learn more about a product, they’ll definitely be influenced by the information they learn. You want anything they learn about your brand to be positive. 

3. The influence of customer reviews

Customer reviews are an especially influential component in the research process. When you’re considering a new product-especially a high-cost one-how often do you read reviews other people have left? 

The average consumer reads ten reviews before making a purchasing decision, according to BrightLocal.

For both online businesses and traditional retail stores, encouraging and monitoring reviews is now an essential part of running a successful business. And if your business gets a lot of negative reviews, it’s important to figure out why and improve on it before you lose your customer base because of it. 

Understanding customer reviews will also be vital to your customer retention strategy, so you can ensure your customers remain loyal. 

4. Expectations of increased choice 

Customers are accustomed to having lots of options. That applies to product options-it’s now possible to find almost any type of product you could want online, and have it shipped from anywhere. 

But it also applies to having more choice in the way they shop, from shipping speeds, to the ability to buy online and return in store, to the capability to find and choose brands based on shared values. If someone decides they want to prioritize buying from eco-conscious brands or woman-owned shops, that’s a lot easier in 2020 than it would have been in 2000. 

In all areas, it’s important for businesses to consider what choices a consumer will expect to have available and which ones they may want to have. Pay attention to what your competitors are offering to understand the choices customers take for granted as normal. 

5. The need to promote your brand online

When someone wants to buy a product in person, they still often start their shopping experience by looking online to see what their store options are. 

That means even if a retail business doesn’t have an eCommerce component, it’s still necessary to have a website and invest in online promotion. Billboards and radio ads won’t cut it anymore. 

Modern businesses will want to be on social media, optimize their website for search engines, and possibly invest in paid advertising channels.

6. Ease of starting a new business

eCommerce has lowered the barriers to entry for entrepreneurship. Starting an online store is cheaper than a brick-and-mortar one, since you don’t have to invest in the real estate costs of a storefront or pay to staff the space full time. 

And building an eCommerce website doesn’t have to be difficult or time consuming. Website builders are an efficient way to  set up a site quickly and affordably, while still looking professional. 

Anyone with a dream of starting a business now has a much better chance of realizing it. People with innovative product ideas or creatives that produce items they can sell, like artwork or clothes, can now much more easily monetize their work and find their audience. 

7. Pressure to provide customer support in more channels

Another big change the internet wrought is expectations around customer service. Customers aren’t satisfied with knowing they can talk to a human at the store, or contact a call center if they have an issue. They want brands to be available in all the channels they like using-a list that seems to experience rapid growth every year.

Retail companies can expect customer service inquiries to come in through email, social media channels, and the business website. And many customers now want the option to use messaging apps like WhatsApp as well. 

Having enough staff to provide support across channels is an expense all retail businesses now need to consider. 

8. More cybersecurity responsibilities

Data breaches are an unfortunate and far too common part of life in the internet age. Now that all businesses are expected to have a website, they must also take steps to make sure all the information they collect and store digitally is secure. 

If hackers can get into the data you have about your customers-especially if that includes sensitive financial information like credit card numbers-you’re responsible. It’s bad for your brand, and bad for the customers that trusted you.

As retail brands move toward collecting and keeping more data about customers and prospects to aid in personalization, the risks only increase. Part of being in business today is accepting the heightened cybersecurity responsibilities required, and that extends to traditional retail businesses with a website as well as eCommerce ones. 

9. Increased drive toward personalization

Now that brands are starting to employ personalization, mostly in online contexts, customers are coming to expect more of it. Many don’t want to see ads for products that are irrelevant to them, or emails that have nothing to do with the array of products and categories they’ve shown an active interest in. 

eCommerce personalization can be hard to do well, particularly for omnichannel companies that want to provide a consistent in-store and online experience. But it’s a growing trend and expectation for retail experiences. 

10. The need to evolve quickly

Technology moves fast. New channels keep coming into play. Businesses have to learn how best to interact with consumers on different device types. And with more brands to compete against, you have more business owners trying out ways to set themselves apart. 

If a retailer in your space starts offering free shipping, or providing free items with every purchase, or doing something else you don’t yet do-you’ll have to figure out how to up your game to avoid losing customers to them.

Across the board, retailers of all types now have to stay on top of changing trends and technologies to make sure you don’t fall behind. Having some agility in your business model so you can quickly adapt as needed is an important ingredient to success. 

eCommerce and Retail Both Have Their Place

Consumers may be increasing how many purchases they make online, but they clearly still get something out of the in-store experience. Whether it’s the ability to bring the items they want home the same day, the browsing experience, the option to see what they buy in person, or some entirely different element-brick-and-mortar stores are unlikely to disappear. 

For many retail brands, the question is how to best offer both experiences, a great online store and brick-and-mortar locations. But whatever your business model is, having a website to represent your brand online isn’t optional. It’s a crucial component for any retail business to include, online or off.

Luckily, learning how to start an online store is easier than ever. Learn more about the benefits of eCommerce for brands.