Challenge of e-commerce: strategies for retailers and investors

No matter how you look at it: e-commerce is a phenomenon that is not going to disappear soon. According to forecasts, revenues achieved online could rise in the next five years to around 118 billion euros and to 23.8 percent of total retail sales. The challenges of online retailing for brick and mortar retailers and municipalities, have largely been identified as: a decrease in footfall in inner cities as well as a decrease in the amount of retail space, this results in an increase in location dependency for retail stores. It is now up to retailers to demonstrate their unique character as they still have a real opportunity: the proportion of selective online shoppers, these are consumers who still visit retail stores while using other channels, is 45 percent and the share of traditional retail shoppers is still 32 percent.

Online retail means consumers today are exposed to a constant plethora of information and products. According to Joachim Stumpf, CEO of BBE Handelsberatung GmbH: "The product selection is vast considering there are over 150,000 online shops in Germany and one million square meters of retail space. At the same time, this environment makes it difficult for retailers to get noticed at all." It is therefore important for retailers to develop their USPs. In addition, shopping should become even more of an experience and offer consumers added value. Stumpf added: "In the shopping center segment, this means, for example, connecting with other retail sectors such as service providers, F&B operators or entertainment. In particular, the F&B sector has created a significant increase in footfall and improved visitor experience at shopping centers."

The expansion of multi-channel services has also contributed to the attractiveness of physical retail formats. In 2014 the percentage of physical retailers with online shops reached 30.5 percent of all retail formats, thus showing the recovery of market share in recent years. According to Stumpf, another reason for expanding a multi-channel strategy is the increasing lack of clear channel preference and the dominance of selective channel choice. Only 20 percent of the population buy almost exclusively online.

The impact of e-commerce on cities and regions is clearly recognizable: footfall and space requirements in cities have declined noticeably. City centers of all sizes are equally affected by this drop in footfall. Stumpf commented: "informed consumers are visiting city centers less frequently to go shopping, especially the so-called "digital native generation”." A solution for this situation: medium-sized cities need to improve the quality of the shopping experience and the recreational value of their inner cities, for example, by paying more attention to cleanliness and safety or extending shopping opening hours.

Your contact

Joachim Stumpf

BBE Handelsberatung GmbH
Brienner Str. 45
80333 München

Tel: +49 89 55118-143
Fax: +49 89 55118-153