By Aimee Chanthadavong

Connectivity and convergence continue to change the face of the retail industry as we see more retailers merge their digital, virtual and physical presence in the market into one single ‘bricks and clicks’ model.

Analysis from Frost & Sullivan found total online retail revenues will reach $4.3 trillion in 2025, account for nearly 20 per cent of total retail. At the moment, the online shopping market in Australia continues to grow with expectations it will account for 7 per cent of total retail sales by the end of the year, which will be equivalent $18.3 billion with the average annual spend online shopping be at $1,750. Of those surveyed, almost 90 per cent of online shoppers expect to increase or at least maintain their online spending over the next 12 months.

Frost & Sullivan visionary innovation research group analyst Archana Vidyasekar told RetailBiz the proliferation of connected devices and the availability of faster internet speeds have catalysed a change in shopping behaviour and fuelled market expansion. This has resulted in seeing retailers enhancing their IT infrastructure and logistics to widen their online presence.

“The future of retail can no longer be only “bricks” or “clicks”. It will have to be a perfect balance of bricks and clicks where physical stores merge and integrate with the digital world creating a omnichannel model for its consumers. Most retailers will be compelled to transition to a hybrid business model that amalgamates brick and clicks creating unique retailing models such as virtual stores, interactive kiosks and online hypermarkets more aggressively,” Vidyasekar said.

The fast pace of urbanisation is further transforming bricks and mortar retailing from big-box to small-box formats. By 2020, Frost & Sullivan has predicted retailer store sizes will shrink by 15 per cent to 20 per cent.  Several retailers have unveiled plans to experiment with small mobile or express stores ranging between 10,000 and 60,000 square feet in size. Other new retailing models business is adopting is the virtual store through leveraging technologies like augmented reality.

“While the growth in online retail has been a healthy boost for the whole retail industry, it has had a tarnishing impact on the traditional brick and mortar stores. Physical stores were quickly being reduced from being a point of sale to a showroom where consumers would check the product out but ultimately buy it online through auction sites like eBay or Flipkart where the prices are more competitive.

“This phenomenon, called ‘showrooming’, has resulted in many brick and mortar stores closing down. The effect has been felt highest in the electronics retailing industry were stores like HMV had to close some of their stores facing competition from the likes of Amazon,” Vidyasekar said.

However at the same time this does not necessarily mean physical retail stores will become obsolete. “Without them shoppers can’t get the full omni-channel shopping experience. However, as has been seen in the US, main retail chains are reducing both the number of retail stores and the size of retail stores to make them more like show rooms. This trend will become increasingly prevalent in Australia over the next five years,” Phil Harpur, senior research Manager, ICT Practice, Australia & New Zealand said.   

Mobile shopping has also seen widespread uptake in Australia as  30 per cent of all Australian internet users aged between 15 and 65 have purchased goods via their smartphones and 19 per cent have purchased through a tablet.

“Give the consumer as many different options to interact with your store. There are now so many options available to the consumer: social media, online websites, order online pick up in-store, in-store kiosks and mobile shopping, and the shopper is now expecting more of these in their overall shopping experience. By missing out on key channels you can alienate a significant part of your customer base. Also take advantage of big data analytics to maximise customer penetration,” Harpur said.