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Canny retailers can thrive in online revolution

Ed Monk

Ed Monk - Fidelity Personal Investing

Back in 2008 less than 5p in every £1 spent by UK shoppers was spent online - just over a decade later and the figure has risen to almost 18p in every £1.

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Two things might strike you about that fact, which was revealed in Office for National Statistics data last week. Firstly, that the past ten years has seen great strides in online retailing (and remember, we were still pretty internet-savvy back in 2008). Secondly, that with more than 80p of every pound still being spent offline, there remains a long way to go in the growth of e-commerce.

This is not just a question of shopping habits. The shift to online retail also has ramifications for the high streets of our villages, town and cities - literally changing what the world around us looks like because we need fewer shops. The ONS noted that 1,234 shops closed in the UK in the first half of 2019 alone.

It also represents a shift in what we do with our time, with the Saturday morning big shop increasingly a thing of the past.

The ONS numbers show that the biggest increase in online shopping since 2008 has come among the 65-plus age group. We can imagine the reasons for this. Internet coverage will have expanded in that time, but so will the growth of internet-enabled devices in everyone’s home. Smartphones were around in 2008 but connections were slower and security process around purchases more clunky.

Now it’s possible to make purchases without ever having to type in lengthy personal or payment details. Features like finger-print recognition and now face recognition make the process even easier.

When the ONS asked those who didn’t shop online why they didn’t, worries about payment security and deliveries were only minority concerns. Mostly, those still holding out against online shopping did so because they preferred the personal experience in stores and valued being able to see and feel items before they bought.

The revolution in shopping has had a profound effect on retailing companies and many have struggled to keep up. Those with large estates of brick-and-mortar stores are having to realign towards the internet and are already up against giants like Amazon in that fight.

But there are success stories out there, even among traditional retailers. WH Smith has been quietly overhauling itself from a high street stationary shop to the seller of snacks and drinks in trains stations and airport. Buying the last minute mineral water before a long journey is still something we find easier to do in physical form.

Next, the fashion chain, has also found success by building a successful online store, both under its own name and through its LABEL arm which incorporates third-party brands. But it has also worked to increase its in-store space as well with 100,000 sq ft expected to be added this year. It has recognised that its physical stores are an important girder within its faster-growing online business because online shoppers still value the ability to accept deliveries in those stores and return unwanted items to them.

There will no doubt be further retail casualties as the revolution to online continues but a new narrative is also taking shape. We do, still, value face-to-face transactions, and visiting stores can still be part of our daily lives, as long as companies are set up to work how shoppers want them to work.

Companies which get this right can thrive even while the balance of their business shifts towards the internet.

Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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