Report: Stores could soon use one-third their space for ecommerce fulfillment

Report: Stores could soon use one-third their space for ecommerce fulfillment

Dive brief:

  • According to Edge by Ascential research, e-commerce is already on the rise and could cause stores to devote as much as a quarter of their space online to order fulfillment.
  • This is partly based on the firm’s estimation that 34.8% of global chain retailers will be online by 2023. That figure was up from 30% in 2021 and rising to almost 40% by 2025.
  • However, online retail sales in the U.S. are much lower than elsewhere. E-commerce is expected to account for 23.6% of all retail sales by 2025, according a July report from eMarketer. According to that report, store fulfillment services will reach $140.96 Billion by 2024.

Dive Insight

E-commerce has been disrupting retail for over two decades before the last year’s pandemic. Consumers can now get much of what they need or want online. This accelerated the disruption and digital encroachment into retailers by two years.ToEdge by Ascential.

E-commerce has been around for almost as long as Amazon, and many other major players joined the fray last year. To stop the spread of the disease, shoppers were kept away from the stores. Many people avoided stores even though they were open because of fear of spreading the virus.

Last year, the retailers who were already trying out using their stores to fulfil orders had an advantage. Many others (even mom-and-pops and small chains not used to selling online) that previously operated only offline began taking online orders for the first time, fulfilling them via curbside pickup, local delivery or shipping.

As stores have reopened post-lockdown, U.S. e-commerce growth has tempered somewhat. But the accelerated growth will mean a much higher proportion of online sales, especially in certain categories. Edge by Ascential projects that in-store sales share will fall to 62.4% by 2025. This is down from around 70% this year and 87% in 2015.

This shift will not be easy or inexpensive. Countervailing forces, like landlords amenable to more generous lease terms and consumers’ desire to get out and about, will help ground physical retail. Online fulfillment, whether through stores or warehouses, and last-mile delivery are more expensive and less efficient than store-based retail. In fact, e-commerce, even Amazon’s, suffered supply chain and shipping constraints that continue to be felt.

Brick and mortar is still the mainstay of commerce in America, particularly in the U.S. Although Edge by Ascential research focuses on how to leverage stores to cater to online shoppers, they also highlight the importance of physical stores for marketing and sales. David Gordon, Edge Retail Insight director of Omnichannel Intelligence, says that online and offline are often blurred but that stores still have a vital role in marketing and sales.

“[T]he store must be a physical gateway to brand and product experiences — places where consumers can be inspired. Learn. Co-work.Gordon stated in a statement that socialising, experimentation with new products and the use of digital touchpoints such as social media and mobile phones to drive in-store foot traffic will allow physical stores to function as part of an interconnected ecosystem. This will, among other things mean that last-mile fulfillment will be more dependent on the store network.