Seattle, Washington, USA - November 13, 2015: Amazon opens its first real life brick and mortar bookstore called Amazon Books in Seattle's University Village


An increasing number of online retailers are moving into physical stores to provide a tangible experience for customers and drive further online sales, according to the Commonwealth Bank Retail Insights Report.

The report reveals 18 per cent of online-only retailers are planning to establish a physical outlet in the year ahead, up from 13 per cent in the previous half yearly report, and over three quarters of retail businesses will have a physical presence.

Commonwealth Bank’s National Manager Retail, Jerry Macey, said the drive towards omni-channel retailing is picking up pace with many online and physical businesses seeking to extend their reach.

“Bricks and mortar and multi-channel retailers are doing more online as customer preferences evolve. At the same time, emboldened digital retailers are opening physical stores to complement and drive further online sales.

“We have seen large online retailers such as Amazon unveil physical stores in the U.S., and this trend is expected to strengthen over the year ahead with almost one in five pure play online retailers planning a bricks and mortar outlet by early 2017,” said Mr Macey.

Online sales still rising, mobiles popular

Retailers are also forecasting robust overall online sales, with an average 24 per cent growth rate expected in the year ahead, up from 20 per cent in the previous half.

Overall they expect 35 per cent of online sales to come via mobile devices over the next 12 months.

In an effort to capture expected online sales growth, technology budgets are again set to increase over the next 12 months with 45 per cent of retailers expecting to lift investment. Overall, the top priorities for investment are e-commerce, loyalty programs and social media.

In terms of outlook, the report shows pure play online retailers are significantly more optimistic than their multi-channel peers, with 46 per cent expecting an improvement in conditions, compared to just 28 per cent among multi-channel businesses.

When looking at the drivers behind the outlook for retailers, for those expecting a decline, 95 per cent attribute it to economic factors. Conversely, for retailers indicating an improvement in business conditions, 71 per cent attribute it to internal factors such as business growth and the introduction of new products.

“Our research shows the most optimistic retailers are those who have taken control of their own destiny, rather than looking to external economic conditions to drive sales growth,” Mr Macey said.

Some more detailed findings:

1. Retailers are forecasting continued online sales growth in the next 12 months with many increasing technology budgets to capture growth

o Retailers remain positive about sales generated from online orders in the year ahead

o Overall 38% of sales currently generated online – up from 35% (multichannel – 18% to 22%)

o Expected growth in online sales over the next 12 months at 24% – up from 20%

o Usage of online purchases made through a mobile devise continue to increase

o Current percentage of mobile sales has increased 23% compared with last wave at 18%

o Overall online sales via mobile expected to increase to 35% in the year ahead

o When compared to the overall sector, pure play online retailers anticipate a decline in the growth rate of sales via mobile devices (27 per cent down from 44 per cent in prior period)

o 45% of retailers expect an increase in technology spend – up from 43% in the previous wave

o The top three investments in technology planned for the next 12 months are ecommerce, social media and loyalty programs

o For the single biggest priority investment, the top was ecommerce (17%, with 41% of all retailers investing here in some way) followed by retail network expansion (13%; with 27% investing here in some way) and personalised customer experience (11%; with 30% investing here in some way)

2. Pure play online retailers have a more positive view on business conditions in the year ahead than their multi-channel counterparts

o Net improvement of +10, remains positive although has reduced from the optimism seen in last report (+20)

o This was more pronounced across multi-channel (+21 to +5) whereas pure play online were substantially more optimistic this wave (+14 to +31)

o Business confidence was highest amongst clothing and footwear (41%) and lowest amongst food & liquor (23% – drop from 37%)

o NSW/ACT were the most positive on outlook for business conditions (34%) while WA was the least optimistic (sharp drop from 29% to 17%)

o Confidence appears to be driven by engagement – 71% of the reasons given for being confident are internal (such as a new product being launched) compared with just 13% for those seeing conditions declining.