With Amazon’s Prime Day taking place across the 13th and 14th of October against the backdrop of a traditional retail landscape struggling as a result of Covid-19, it is clear that 2020 will go on record as the year that the digital revolution made tremendous strides through the consumer psyche. Online retail channels are expected to see record highs as consumers are unable to frequent physical retail locations, with traditional retailers forced to embrace online and multi-channel methodologies in a bid to protect their position within the market from the continued encroachment of online retail giants such as Amazon. Nevertheless, with Amazon having accounted for around 20% of all global shipments of audio and visual devices in 2019, and the pure online channel itself expected to account almost 40% of all global shipments in 2020, it’s clear that online retailers such as Amazon, Alibaba, JD.com and Walmart-owned Flipkart are all well placed to capitalise on the challenges currently facing traditional retailers. And, while the challenges facing traditional retailers in 2020 are temporary, the consequences will be far reaching, with the acceleration of online retail considered irreversible by many in the industry.
One of the key trends supporting the long-term transition from physical to online retail is the continued and growing importance of the ‘Marketplace’. Commonly associated with Amazon – and accounting for 60% of sales on its platform – the Marketplace concept has been adopted by other retailers such as Walmart and Best Buy. This mechanism allows vendors, distributors, and other retailers to treat these platforms as shop windows, putting their products in front of customers who they otherwise may not reach. This is a continually growing trend; globally speaking, an estimated 10% of all TV’s in 2023 will ship through the Marketplace of pure online retailers, up from 5% in 2017. In many ways, the Marketplace platform allows vendors and retailers to benefit from the growth of the pure online channel without having to make significant investments into their own digital shopping experience. For some, this will have proven significant this year given the closure of physical retail in many parts of the world due to the pandemic and will increasingly be seen as a key retail channel in the coming years.
This brings us back to Prime Day, and the increasingly existential threat facing traditional retailers. Futuresource’s ongoing research into the retail landscape has consistently highlighted that traditional retailers who have historically failed to invest into their online and multi-channel retail strategies have fallen far behind the curve this year and face considerable and possible insurmountable challenges to regain lost ground. However, retailers such as Best Buy and Walmart in the US, and MediaMarkt and Currys PC World in Europe, have generally withstood the challenges that 2020 has posed as a result of good investment in their digital retail strategies and agile implementation of creative retail solutions as lockdowns started closing down retail stores. It is clear that the likes of Amazon, while undoubtedly having a fantastic year, haven’t had an entirely clear run at consumers. Some traditional retailers have successfully implemented multi-channel and online-only methods of retail. In fact, over 55% of all online or multi-channel transactions in 2020 for audio-visual devices came from a traditional retailer, a significant growth from the 40% seen in 2019.
Nevertheless, while there have been some success stories from the traditional retail landscape in 2020, this year will be considered by analysts as the turning point for digital retail. Besides seeing record highs in 2020, Futuresource expects that the long-term migration to online and multi-channel retail to accelerate in the coming years. It is certainly not all bad news for physical retailers; the implementation of experience-led retail strategies means that traditional retailers can retain a competitive advantage over online retailers and therefore remain essential to consumer purchasing journeys. But, inevitably, this reinvention of the traditional retail landscape will come at a cost, resulting in a smaller physical retail landscape. And, with the holiday season getting underway this Q4, and physical retailers eschewing Black Friday events in the name of public health, Prime Day and other global Online retail events now have a clear opportunity to further capitalise on Covid-19 and dominate the holiday quarter.
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