Physical or Virtual? It Gets Blurry For Aussie Retail.

According to May data from the Australian Bureau of Statistics (ABS), the value of multichannel online purchases was nearly double that of purchases through pure-play online.

The ABS has been keeping track of online purchases since 2015 as part of its reporting on the Australian retail sector. A definite pattern has emerged over that time: online sales have more than doubled in four years. And in the same period, the most significant growth has been through multichannel sales.

It is a well-recognized pattern as physical retailers fight pure-play online retailers. At one point, the latter was forecasted to consign old-style physical retailing to the dustbin of history.

As with any technological challenge, the results and the trends have turned out to be different. For retail, it has all come down to changing patterns in customer behavior.

Consumers Want It All

In 2019, the consumer is an entirely different entity than he or she was at the turn of the millennium. A big reason for this is the way they have adapted to technology and responded most conveniently.

Consequently, we now see the massive uptick in augmented reality applications for retail. It is driven by online retailers seeking to bridge that gap between virtual and physical.

Today's consumers can apply virtual makeup to their faces and put on virtual sunglasses to see how they look. They can go shopping at Ikea with a virtual reality app which enables them to place furniture in their homes before they even set foot in a store.

The grocery industry is working towards augmented reality for cooking classes, demonstrations, and wine education. Meanwhile, the beauty industry will soon deliver online AR makeup tutorials.

Unsurprisingly, investment in AR and VR technology is booming. After reaching USD 7.5 billion in the Asia Pacific in 2019, it will hit USD 30 billion by 2023, according to IDC.

The other significant change in consumer behavior is the way they use physical stores. Increasingly, smart retailers understand that just because a customer doesn’t buy an item when they are instore doesn’t mean they won’t ultimately buy.

Repurposing Store Value

In many cases, customers are checking out potential purchases in the physical store. They are then buying online at their convenience. It has significant implications for how retailers need to integrate their physical and online presences and also organize their logistics, and the crucial last-mile delivery piece to the customer.

All this was underlined last week by research released by big data analytics firm Quantium. It found that at least 60% of online sales for domestic retailers are by omnichannel players who are also maintaining a physical store.

Pure-play online retailers generate only 40% of e-commerce sales. It is a figure that roughly tallies with ABS analysis.

Quantium’s figures said that the penetration rate for e-commerce in Australia is at 9%. This puts it equal with Canada but significantly less than the U.S. and the U.K., which are at 14% and 18% respectively.

There are various suggestions for why this should be the case. But less efficient logistics and the recent arrival of Amazon in Australia are the most likely.

Even so, online sales are at a sufficient level to be a significant factor in driving innovation in retailing.

Where just about all physical retailers have invested in an online storefront, so a growing number of online retailers are taking physical space in shopping centers.

Convenience Wars Gets Physical

When Amazon was a young company, 20 years ago, chief executive Jeff Bezos said bricks and mortar stores could only survive if they provided immediate convenience or entertainment value.

This is a prediction that is being borne out as retailers have changed their focus. Today, they aspire to deliver an inspirational experience to drive a sale and create brand loyalty.

The catalyst for this has been the development of online commerce. Instead of being a threat, it is now a part of every retailer's channel mix.

So today's store has become a showroom, a theatre, and a marketing venue. Yesterday's big shopping malls are becoming community hubs. And savvy developers are installing skate ramps and barbeque pits. Although they have no direct relation to retail, they create an experience.

In the 21st century, people are increasingly living their lives in multichannels. As these lines continue to blur, retail's response will be to deliver a better and seamless experience across all.

It is a transformation which will not only be convenient but will be a significant source of entertainment and inspiration to millions over the next decades.