Page 348 - Introduction to Electronic Commerce and Social Commerce

11.1 Changing Retail Landscape 335

11.1 CHANGING RETAIL LANDSCAPE There is no doubt that the number of retail stores and retail
square footage are on the decline. So is the foot traffic within
“Retail stores will completely die.” “Cash is King no more.” most stores. A lot of this decline is a function of online shop-
“The PC is dead.” It’s easy to find any number of pundits ping, but this doesn’t mean that stores are completely dying.
proclaiming the imminent demise of some historical pillar of It does mean that the shopping experiences we know today
off-line or online retail. However, as the writer Mark Twain are morphing into something different, so that strictly keep-
was once quoted as saying “…the report of my death has ing score of in-store versus online dollars may be moot. This
been grossly exaggerated.” Clearly, online shopping, digital is why, for example, Forrester Research (O’Grady 2016) has
payments, and mobile devices are all growing at substantial been reporting the relative position of online, Web-influenced,
rates relative to their historical counterparts, but as Bill Gates and non-Web-influenced off-line sales. When these distinc-
has said “we always overestimate the change that will occur tions are made, they estimate that the $3.6 trillion in global
in the next two years and underestimate the change that will retails sales for 2016 sales will be divided among the three
occur in the next ten.” None of these are in immediate danger categories 8%, 44%, and 48%, respectively.
of passing, especially when they are viewed from a global
perspective.
Cash Versus Noncash Transactions

Omni-Channel Retail Both off-line and online noncash payments are on the rise. In
absolute terms this doesn’t mean that cash payments are
Overall, worldwide retail sales are growing, but EC retail sales declining and ultimately dying. In fact they are actually
are growing faster (eMarketer 2015). In 2015, global retail increasing but at a slower rate than noncash payments.
sales were close to $24 trillion. By 2019, they will be around Unlike noncash payments, it is very difficult to track and
$29 trillion, a growth rate of 6% annually. In contrast, EC retail accurately measure the total use of cash in a country.
sales were estimated at $1.7 trillion in 2015 which was 7% of Governments try to track how much cash is in circulation,
the total figure. This online segment of sales is projected to but most governments have no way of accurately knowing
grow at over 8% annually for the next few years and will reach who’s using how much cash to buy what. In fact, this is one
$3.6 trillion in 2019. By that time, they will be 12% of the of the reasons that some people like cash, as well as the digi-
total. Loosely translated, this means that for every $1 of EC tal counterparts like bitcoins.
sales there are $9 sold elsewhere (primarily in stores). One thing we can measure is ATM activity. The ATM busi-
In todays world of omni-channel retail, it’s misleading to ness is booming (Gordon 2015). In 2014, the installed base of
look at in-store versus online as a zero sum game. Online and ATMs worldwide was three million and is expected to be at
offline activities are intertwined. If I spend time in a store four million by 2020. Indeed, China with the fast growing
looking at some item of interest, check out its features or fit, economy had 600,000 ATMs that year, an increase of 500%
go online to check competitive prices and reviews and avail- from the year before. In 2014, there were over 90 billion cash
ability elsewhere, and then decide to go home and order it withdrawals worth around $14 trillion. That was an increase
online, is this an online sale or an in-store sale. What if I of over 4%. Of course, in the future we’ll be able to load our
don’t go home, but instead order it from a web kiosk in the electronic wallets from ATMs, so we’ll have to make a dis-
store? In-store or online sale? Technically, these “showroom- tinction between cash versus electronic withdrawals.
ing” sales would probably end up in the EC column. Now, From a cash standpoint, another thing we can estimate is
what about the reverse. Suppose, I’m at home and spend time the relative number of consumer transactions that are cash
on my smartphone checking on the prices, reviews, and versus noncash. A widely cited report from MasterCard
availability of some product, then decide to go to the store (2015) noted that cash accounts for 85% of global consumer
and buy it. The store will get the credit, but the sale was transactions, although this percentage varies widely by coun-
really the result of my “web-rooming” activities. try. Actually, in the vast majority of countries the percent
While these and other combinations aren’t possible with exceeds 85%. Included in this majority are China, Spain,
every product and every retailer, they are rapidly becoming Brazil, Japan, India, and Russia. This is followed by a group
so for leading retailers. A few years ago, retailers’ store sys- of countries like the USA, Australia, Germany, and South
tems and online systems—both front office and back—were Korea where the percent of consumer cash transactions falls
completely separate. This made it difficult to offer and ser- between 55 and 70%. Finally, there is a very small handful of
vice customers with all these possible combinations. countries where the percent is between 40 and 50%. These
However, today many of the world’s leading retailers are are the closest thing we get to a cashless society and include
transitioning systems, so they can provide their customers an Singapore, the Netherlands, France, Sweden, Canada, and
array of browsing, buying, and delivery choices. Belgium.