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The share of goods bought online has increased rapidly over the past decade, but will it continue? And which merchandise categories are adapting to provide the best omnichannel experience?
Merchandise trends
Although the share of e-commerce sales in the UK has dropped to pre-pandemic levels (at 24%), sales are predicted to continue to grow at an annual rate of 12.6% between 2022 and 2025, above China (4.8%) and France (11.7%) but below the US (14.9%). The UK also has a high user penetration of e-commerce platforms compared to other markets at 82%, above the US (80%), France (77%) and China (72%), demonstrating the relevance of e-commerce for retailers going forward.
All retail categories in the UK have followed a similar growth rate of e-commerce sales since 2009, except for grocery (which accelerated greatly during lockdown). Clothing & footwear was one of the first categories to see significant online adoption, but has since experienced slower growth, demonstrating desire for both traditional and online channels within this category. Grocery stores have been successful at incorporating an omnichannel experience into stores, with most large chains offering click and collect and online delivery services, with some brands such as Tesco rolling out `dark stores': spaces dedicated purely for online order fulfilment.
Omnichannel retail
UK shoppers increasingly expect a seamless omnichannel retail experience, with many seeking inspiration and product information online and looking to integrate new technologies within their shopping experiences. The challenge for many retailers lies in finding a balance between online and in-store sales, making an omnichannel experience key. Retailers are recognising this, investing in their in-store experience to provide a reason for shoppers to visit and complement their online offer.
Situ Live is an experiential, immersive store in Westfield, London, which showcases the latest branded products across seven theatres, allowing customers to compare and try out products before ordering online within the store.
Sephora has invested heavily in its in-store experience and personalisation, using augmented reality to help customers select their perfect foundation shade. Many make up brands including Charlotte Tilbury and L'Oreal are also using these types of technologies to enhance their in-store experiences.
F&B
Online F&B (delivery) sales have increased significantly over the past 5 years, with revenue for restaurant to consumer delivery increasing by a CAGR of 31.4% from 2017 to 2021. The UK has the third highest user penetration rate of online food delivery worldwide at 50.7%, below South Korea and The Netherlands but above the US and China. Online sales are expected to continue to increase at a CAGR of 9.13% within the next 5 years. More F&B outlets are offering takeaway and delivery services, but challenges lie in those that are addressing both online and in-store orders.
Dark kitchens have been increasing in the UK in response to increased demand for online food delivery. These are catering venues for the sole purpose of making takeaway food to be delivered to homes, which reduces overhead costs for suppliers, facilitates the logistical process and reduces pressures on dine-in outlets. There are currently 750 in the UK, but these are expected to continue to grow, with popular brands such as Deliveroo, Wagamama and McDonald's rolling out these outlets.
Karma Kitchen rents out quality kitchens to restaurants operating a delivery only service. This is particularly beneficial for start-ups and chefs looking to establish a footing in the market, and these types of outlets are likely to increase going forward given the demand for food delivery.
Given the future expected growth in online market share over the next 5 years, a robust online strategy is key, however, as customer's expectations mature and demand in-store experiences, retailers must ensure a seamless combination of physical and online channels as part of an omnichannel experience.
Emily Brown