Here’s the truth. The retail industry experiences a major shift about every 50 years or so. The modern department store that we see today? Was only made possible by the growth of large cities and the development of railroad networks a century and a half ago. Fifty years later, mass-produced cars came out, and soon after shopping malls with specialty stores started popping up in the new suburbs to compete with department stores in the cities.
In the 70s and 80s, discount chains like Globe, Hankyu Jaya, and others grew, and soon after, “category killers” like Mydin, and MR DIY came on the scene. All of these stores hurt or changed the old-style mall in some way.
What came before wasn’t completely wiped out, but the landscape and expectations of consumers were completely reshaped by each wave of change. In the face of competition from newer formats, retailers must either adapt or go out of business if they don’t change their business model.
Digital retail technology had a rocky start. During the 90s, many online stores like Amazon.com, Ebay.com, and pretty much everythingelse.com embraced what they called “online shopping” or “electronic commerce.” The dot-com bubble burst because of bad strategies, speculative bets, and a slowing economy. This caused a sudden shift from irrational optimism to the harsh reality of the economy.
This economic reality is well-established today. Digital retailing could reach 15% to 20% of global sales, though the proportion will vary by sector. Furthermore, a large portion of digital retailing is now extremely profitable. Amazon, for example, has a five-year average return on investment of 17 percent, whereas traditional discount and department stores have a return on investment of 6.5 percent.
About half of retail sales are now influenced by digital information, and that percentage is expected to rise sharply.
Soon, digitised retail will become something entirely different. Retailers will be able to interact with customers via a plethora of channels. And unless or until traditional merchants adopt an entirely new perspective, they will be swept away.