Technology innovation and e-commerce a necessity for bricks retailers to remain profitable


To withstand the onslaught of online shopping and increase foot traffic into their stores, big hypermarket and supermarket chains (bricks and mortar) such as Sainsbury’s

While bricks and mortar retailers are witnessing decline in their sales, e-commerce companies such as Amazon, Alibaba, Rakuten and Groupon are witnessing high growth as lot of consumers are shifting online. Auchan, Walmart, Aldi and Morrisons are re-evaluating their channel sales strategies and implementing in-store technologies such as self-checkout counters, scan and pay mobile applications and unmanned stores, says leading data and analytics company GlobalData.

The declining revenues and increasing online sales are indicative of the changing retail scenario and even department stores and convenience stores are struggling to generate sales in the competitive environment. As a result, major department stores such as Macy’s and Nordstrom are being forced to shut down operations of some of their stores. 

Maruti Patnaik, Analyst at GlobalData, comments: “In addition, specialist retailers and department stores are lining up their stores with innovations such as robot assists, augmented reality kiosks, in-store endless aisles using digital screens, and in-store digital ordering services. These technology innovations attract significant investment and unless retailers find a cost-efficient way to implement these technologies in their stores, may do more harm than good. Therefore, the question remains, whether in-store technology innovation is enough, or retailers have to rethink their strategy to remain profitable in the market?”

To this end, physical store retailers are acquiring e-commerce companies to enter into the online marketplace. Some examples include Walmart’s acquisition of ModCloth, Lidl’s acquisition of Kochzauber to expand its e-commerce, and Nordstrom’s acquisition of two e-commerce technology start-ups BevyUp and MessageYes, to enhance mobile app and e-commerce expertize. Furthermore, Walmart is in process to acquire Indian e-commerce company, Flipkart. 

GlobalData’s retail data finds that sales of top 100 hypermarkets, supermarkets and hard discounters have declined at a CAGR of 3.3%, while online sales have increased by 4.5% from 2014 to 2016. Similarly, the sales of top 100 specialist retailers have declined at a CAGR of 0.8% and their online sales have increased at 6.12% during the reporting period. In addition, performance indicators such as sales density of hypermarkets, supermarkets, and hard discounters is decreasing at a CAGR of 5.6%, and specialist retailers sales density declining at 3.7% from 2014 to 2016. 

Patnaik concludes: “Physical store retailers, operating in any format (large, medium or small) have to expand operations across all channels for maximizing sales. This will include launching mobile apps, setting up online delivery services, developing and acquiring e-commerce sites, and partnering with online enterprises. Consequently, multi-channel retailing will be the key factor to remain profitable in the market.” 

About GlobalData 

4,000 of the world’s largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData’s unique data, expert analysis and innovative solutions, all in one platform. GlobalData’s mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors.

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