Tuesday, January 29, 2013

UK’s Retail Industry Changing Quickly

A difficult lesson in survival is playing out on England’s High Street as retailers such as HMV, Jessops and Comet have all recently declared bankruptcy. Although this is partly the fault of a dismal economy it is also due to the rise of ecommerce.

According to the Office for National Statistics (ONS), retailers experienced a 40% increase in turnover in 2011 over 2010 for an estimated £21.4bn from ecommerce sales. For the 2012 holiday season, Capgemini and the Interactive Media in Retail Group (IMRG) estimates e-retail sales increased 17.5% and 12% for December and November respectively. However, brick and mortar retail sales fell 0.1% between November and December and only increased 0.3% for December, the slowest annual growth rate for a December since 1998 according to ONS figures.

e-Retailers such as Amazon.com and eBay have brought a new business model to the UK’s retailing industry – stores open 24/7 via a consumer’s laptop or mobile device, the ability to compare products and prices in the comfort of one’s home and delivery to the consumer’s door or wherever the consumer chooses.

This business model has brought many changes to the supply chain –quicker fulfillment and delivery to differing end points, returns management and payment options – just to name just a few.  As such, brick and mortar retailers are scrambling to make needed changes in order to survive and remain competitive.

It is difficult to say good-bye to retailers such as 92 year-old HMV, 77 year-old Jessops and 79 year-old Comet but even despite financial bumps along the way, 93 year-old Tesco appears to have figured out the new retail industry. Tesco has diversified and invested heavily in ecommerce. In fact, for the fiscal year ending April 5, 2012, the company’s online sales topped £2bn. By 2017, the company expects internet sales to increase to £5bn. Among the many services Tesco offers is online ordering with a choice of pickup either at stores or via home delivery; Similar to Amazon.com, Tesco allows third-party retailers to use its website as "an online shopping mall", with Tesco receiving a cut of every sale and recently the company announced it is venturing into 3D shopping.

The ability to not only adapt to a changing retail industry but also to respond to these changes with a flexible, agile supply chain is now a necessity for retailers to survive. As more and more brick and mortar retailers embrace ecommerce they will need to bolster their supply chain to provide a successful multichannel experience for consumer.
Supply chain overviews of leading retailers such as Tesco will be included in Ti’s next report in its ecommerce logistics series, Europe e-Commerce Logistics, available in February.