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Peak E-Commerce
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Peak e-Commerce

How Long Till Online Makes Up 50% or So of UK Retail Sales?

God made the wicked Grocer
For a mystery and a sign,
That men might shun the awful shops
And go to inns to dine;

G.K. Chesterton (1914) 'The Song Against Grocers', The Flying Inn.

Peak e-Commerce/Peak Online
How soon will we get Peak Online e-Commerce ?

Peak is one of those terms that have crept into general use unnoticed, along with 'upcoming', 'meet with', 'outage' and 'step up to the plate'.

The Sun and The Times newspapers believe they have cracked peak online, forecasting that in five years' time online retailing will have captured 50% of UK retail trade (I think they mean 2021) (http://www.thesun.co.uk/sol/homepage/news/6880465/Online-shopping-to-overtake-high-street-within-five-years.html). This is nonsense of course, though it is based on a 'forecast' made by a UK trade association closely identified with e-Commerce. The trade body apparently found that online sales in the UK were around 140 billion in 2015, were growing by 11% each year, and were already equivalent to 25% of the UK retail market.

An Important Issue

However wrong, both journals raise an interesting question. Will online retailing grow and grow and grow - and keep on growing - till it captures one-half or more of UK retail sales? What is the end game in e-commerce? Not everybody likes shopping, and there may be many including the Victorian socialist G K Chesterton (see The Flying Inn, above) who would prefer to spend more of their life in pubs than grocery shops. His friend H G Wells ('he is so often nearly right' said Chesterton) failed to forecast e-commerce (who did?) though he did suggest cell-based message devices (mobiles?) (in Men Like Gods, 1923).

The Statistics Do Not Compute

It is hard to believe that online retail already has 25% of UK retail sales. CRR's research puts the figure somewhere above 15% (2015). If one includes online sales of holidays, travel, betting, insurance etc then you might get 140 billion, but it would be folly to express this figure as a percentage only of retail sales of merchandise and end up with a worthwhile statistic. And if e-Commerce sales were an average of 25% of total retail sales, then this would mean that online non-food would have to have 56.5% of non-food retail sales, which is also nonsense. We know that online food is only 6% of food sales, so, statistically, non-food e-commerce would have to be massive to make up for food's small online share if total online retail equals 25% of all retail sales. The statistic that online is already 25% of retail sales do not relate to retailing as we know it.

Peak Online: the Truth

The CRR view is that online retailers have 15%-16% of the UK retail market according to our annual surveys (http://www.retailresearch.org/onlineretailing.php).

In the next few years, continued fast growth could mean that e-commerce might probably gain one-fifth (20%) of all annual retail trade by 2020 or 2021, and perhaps one-quarter (25%) by 2025. This is dependent on nothing else changing and the online future being a linear continuation of our recent past. At the Centre for Retail Research (CRR) we do not make ten-year or very long-term forecasts about the structure of retail, because they are almost certain to be wrong. Predictions are sometimes right but analytical forecasts are frequently wrong because researchers don't challenge established views, get too committed to the result they really want, assume the future will develop much like the recent past, or under-estimate the likelihood of unplanned outcomes coming about.

The Centre itself is mentioned in the Sun and Times reports on peak e-Commerce, but whatever these newspapers say we do not have any view about whether online will ever gain 40% or 50% of the UK retail market in the 2030s and 2040s. But we will be watching events closely.

Definitions:

Retail: sale of merchandise to the final consumer, excluding tickets, travel, vacations, fuel, insurance or fast food/restaurants/food services. The exclusions are services but are not retail merchandise.

Online: sales made using a digital computer or mobile device.

e-Commerce: see 'online'.

Please note: quoting from G K Chesterton does not imply that we share all his views, but we do like The Napoleon of Notting Hill.







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