But though the e-commerce growth rate is attractive, it has slowed from about 30% per year in the early 2000s to less than half that rate today. If the trend continues, e-commerce sales will increase from 11% of Forrester’s top 30 categories to about 18% by 2030—higher in some (such as music) and lower in others (such as food). While 18% is a significant number, it does not exactly spell the end of physical stores.
The current hyperbole also misses the mark in other important ways:
- About half of those e-commerce sales are actually going to retailers with physical stores. Brick and mortar retailers still control between 94% and 97% of total retail sales. Several large store-based retailers (including Apple and Macy’s are growing their e-commerce sales even faster than Amazon.
- It’s more and more difficult to distinguish e-commerce sales from others. Imagine that a customer goes to a Macy’s store, learns that the product is out of stock, and uses her smartphone to order the product from another Macy’s outlet, which ships it to her home the same day. Is that an e-commerce sale or a physical one?
- Pure-play online retailers don’t have the economic advantages that many observers ascribe to them. Analyzing the profitability of public e-commerce retailers, including the mighty Amazon, Bain finds that e-commerce’s pricing advantages mostly stem from unsustainably lower profit margins rather than from lower costs. The information technology, distribution centers, shipping, and returns processing required by e-commerce companies can actually cost as much as running physical stores.
All of these issues point to one conclusion: Omnichannel retailers—those that seamlessly integrate the best of both digital and physical worlds at each step of the customer experience—are likely to enjoy significant advantages over retailers that try to pursue either one alone or both independently. For omnichannel retailers, websites and mobile apps are not just e-commerce ordering vehicles, they are front doors to the stores. Stores are not just showrooms, they are digitally-enabled inspiration sites, testing labs, purchase points, instantaneous pickup places, help desks, shipping centers, and return locations.