Retail is in flux as brick gives way to click

In the US, ‘brick’ is giving way to click. Credit Suisse has predicted that the number of outlet closures in 2017 will reach 8,640, this despite a rebound in the overall economy. Retail giant, Wal-Mart has cut 1,000 jobs at its head office in Arkansas. It reported an 8% fall in net income in late 2016.

Amazon is gobbling the lunch boxes of a lot of its rivals. Last July, it posed a 60% rise in sales on its annual ‘Prime Day’.

The inexorable rise of online retailing is only part of the picture. Forbes magazine reports rising sales in second hand stores as younger folk “chase a more meaningful life experience.”

Then there is the ‘Tiny House’ movement where millennials, in particular, try to cut down on their junk spend for the sake of their wallets and the future of the planet.

Will manufacturers in Asia, in particular, suffer as people switch more of their spend towards experiences, including high-end holidays? Men are spending more on their clothes and activity in DIY stores is picking up as more people refurbish their houses.

US retail expert Nikki Baird predicts yet more disruption in 2018 as retailers introduce “augmented and virtual reality” into their stores. Data gathering is becoming ever more sophisticated and the link between online and in-store activity is becoming better understood. American retailing is being buoyed by a 4% increase in personal income, says consultancy Deloitte, though some question its data.

On the food front, new trends include a taste for Japanese street food. Some Millennials are also opting for a fourth meal to wrap up the day, though young people are boozing less, opting instead for high-end products like whiskey. The spend on make-up products is also on the increase. This is being described as the “lipstick on the retail pig.”

The Irish economy is going well, though it remains to be seen whether the business train will be slowed, or even derailed, by a Brexit talks breakdown.

According to digital marketing firm, Wolfgang Digital, the Irish online economy jumped by 45% in 2015 and by that again in 2016. Overall traffic to Irish e-commerce sites was up 17% last year. But Brexit is posing big challenges in the digital economy, with the UK’s share of overseas Irish revenues plummeting from 36% to 19% in the wake of the referendum result.

Achieving a European-wide digital economy is now a key EU goal. Ironically, a departing UK is well ahead on this front.

Lobby group Retail Ireland has warned that too much revenue is now leaking out of our economy, through online purchases, with the value of retail sales here still 13% below pre-crisis levels. While 280,000 people are still employed in Irish retail, most of the 40,000 jobs lost have yet to be recovered.

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Retail Ireland is calling for an online investment support tax credit scheme so that indigenous firms can win back more of the three quarters of online sales revenue which currently leaves the country.

However, Wolfgang Digital boss Alan Coleman insists that Irish firms are not lagging overseas competitors in the digital arena.

“The UK is the most advanced e-commerce market in the world. It is a healthy benchmark for us,” he said.

He believes that Irish people are tech savvy, and increasingly active online both as consumers and as suppliers. The 45% growth rate registered is, he said, being enjoyed by Irish-based firms which account for the bulk of his company’s data set.

Mr Coleman cites clients such as Ballybofey-based McElhinneys, a fashion retailer, and Sligo-based Voya, a maker of seaweed based beauty products, as examples of firms which have benefited greatly from an investment in digital marketing.

In his view, firms should learn to live with Amazon, joining forces with the giant distributor. While margins may be lower, volumes should grow and the firms will be better able to figure out their unique selling propositions.

Paradoxically, customers are more likely to show loyalty when buying online than when doing so, offline. Most deal with just three or four websites, once they have found companies they like dealing with and have overcome the initial obstacles.

There are, it seems, huge opportunities out there, particularly for smaller suppliers and retailers operating away from large urban locations, without the resources for expensive conventional media campaigns in foreign markets.

But are our State agencies doing enough to assist them in the task of transforming the way they do business and in making the necessary upfront investment commitment?

Does the traditional method of export promotion, in which a Government Minister and top official leads a team of businesses to a far flung destination, need to be rethought, given the ongoing transformation in the way goods and services are bought and sold ?