Convergence Puts Fun Back into Shopping

A clear line once divided online retailers and brick-and-mortar ones. Today, that line is blurring.

Online retail still remains strong. It more than doubled in Australia in the last four years. The Australian Bureau of Statistics (ABS) said that online retail makes around 5.6% of all retail sales.

Yet, this growth is not driven by online retail pure-play giants like ASOS and Amazon anymore. Every major retailer now has both a physical and an online presence.

It is partly driven by changes in consumer behavior. Many consumers expect home delivery of items they bought in-store – often within the same day.

This new consumer expectation is creating a new market for last-mile delivery. According to McKinsey, the market is experiencing double-digit growth in mature markets. It is more than 100% in developing markets.

Last-mile to Convergence

Last-mile delivery is creating another trend: the convergence of in-store and online channels. The aim is to deliver a more connected customer experience.

This convergence is growing fast. ABS retail sales figures showed that it increased from 1.8% of total national retail sales in January 2015 to 3.7%. It is almost double that of pure-play online. ABS labels this category “multi-channel” retailing which includes telephone ordering.

The growth is creating opportunities for existing and new retail brands. It is also creating a new brand of startups. They include Sendle, Shippit, Zoom2U, Sherpa and Australia Post’s Shipster.

For example, Shippit offers its delivery services to retailers through different sales channels. They include BigCommerce, eBay and Shopify. But it also deals directly with major retail brands.

The company is unlike a traditional courier company. It uses a technology platform to collaborate with several couriers and retailers.

Click and Collect Counterattack

In the U.S., the convergence is helping major retailers regain ground lost to online retailers.

Walmart’s “click and collect” grocery channel is a good example. Customers fill their online shopping baskets and collect at the nearest stores. Around 1,000 stores offer this channel and will be available at every store by the end of 2019.

Ikea recently announced it was opening a new store on Sydney’s Westfield Warringah Mall. The big news was the size – it will be 100 square meters. This is a fraction of the 30,000 square-meter flagship in the city’s southwest.

The “home planning studio” will be the first of more than 30 Ikea plans to open across Australia. It is locating many of them within shopping centers. Consumers can then either order in-store or online after experiencing the products.

For Ikea, it is about building more “touch points” to interact with customers. It also augments their do-it-yourself offer with added services.