Written by Or Lenchner, CEO, Luminati Networks
The end of the British high street has been predicted since at least the end of the last decade, but despite this, and the combination of threats posed by Brexit, stagnant real wages, and increasingly competitive and customer centric e-commerce giants, the great British high street has remained a persistent force. With some online retailers and challenger brands even choosing to open physical outlets for the first time, a sign of their continued relevance.
It’s no surprise that the Covid-19 pandemic has been an immensely testing time for British retail and this was highlighted in the most recent figures release by the Office of National Statistics. The data revealed the worst single monthly fall in retail sales in UK history (a 5.1% drop). Retailers that choose to cling to traditional models such as Primark, which is entirely focused on physical sales, have suffered existential threats to their business. It’s easy to see why the future of the high street appears uncertain.
2020 will mean radical changes in the business models of UK retailers, but although Covid-19 is integral to these shifts, there are strong underlying trends which are inevitably pushing the UK towards e-commerce dominance (with the pandemic exacerbating this).
During the pandemic, consumer buying habits shifted radically almost overnight in response to Covid-19, as our data gathered with QuickLizard demonstrates. To be agile and make lightning quick business decisions, retailers needed near-live data to keep up with these sudden fluctuations demand. Data insights allow online retailers to offer consumers exactly the right product, at exactly the right price, at exactly the right time based on consumer buying habits and sentiments, in a way which is simply impossible with physical stores.
The key importance of demographic shifts
An important factor that will make the 2020 shift to e-commerce permanent is the changing habits of Britain’s older demographic. Though e-commerce has had a very high level of adoption among the youngest segment of the consumer population, the over 40 demographic has remained stereotypically reluctant. But the inescapable reality of social distancing has meant they have recently been forced to abandon any hesitation or technophobia. Our online data collected in collaboration with our partners shows that older consumers are now embracing online retail and are currently using e-commerce at a rate 15 percent higher than the same time last year. And now that the initial familiarisation process has taken place, we expect their newly found enthusiasm to continue even after lockdown eases.
With Britain’s average age now 40, this change is key. On average the over 40 demographic reports the highest levels of disposable income in the UK with their consumer spending clocking in at around £803.91 per week in 2019, far outstripping the spending of Millennial and Generation Z consumers. This demographic change will almost certainly see more money flowing into the hands of eCommerce companies, leading to superior growth opportunities for mostly online retailers, as these profits are re-invested.
Why data will be pivotal in the transition
Aside from these demographic changes, the other pivotal element driving the inevitable switch to online retail is the power of the underlying technology driving eCommerce. Data is a key factor driving almost every business decision in today’s world regardless of industry, and online retailers are in privileged position of being able to react to it in a more agile, efficient way.
Traditional sources of data used by the retail industry, such as government issued statistics or reports drafted by consultancies or analyst houses, can take weeks or even months to finalise. As a result, these often don’t provide a fully up to date picture of the current retail market. Modern retailers, in an uncertain time such as this, need to be able to react to online data that is gathered frequently in real time. Traditional monthly reports simply can’t meet the demands of the current dynamic retail climate.
E-commerce companies can leverage near-live gathered data to make intelligent pricing decisions based on their competition. Automated online data collection empowers them to see what their competitors are charging for say, a pair of black jeans, and then optimise the price they charge based on this – therefore ensuring that they are neither undercharging nor overcharging consumers. This means better outcomes for both businesses and consumers. Online data collection can also empower businesses to help stock the right products based on openly available insights taken from across the web including social media channels (by seeing what is selling out), allowing them to stock goods in the right quantities.
Why ethics will be more important than ever
As the UK slowly returns to whatever the “new normal” is, consumers won’t be quick to forget their old buying habits which they acquired under lockdown. Organisations who can leverage the power of data will find a growing global audience. But it’s important that online retailers use their new position of power and market dominance to give their consumers and their data the respect they deserve. Online retailers have a responsibility to use their finances and their data insights to give back to the UK community in any way they can, whether that is via contributing to global initiatives, research projects, or leveraging their pre-existing infrastructure to give to those in need.
Ethics should be at the forefront of all their decision-making processes (and this should be applied to any companies they choose to partner with). Technology should be used not just to increase profit margins but to provide customers with the best deals, and best quality of customer experience as a show of good faith and appreciation during these testing times.