At the end of 2016, Amazon – the American online retailer – was worth more than all major department stores in the United States. While Amazon saw its value balloon from USD 17.5 billion in 2006 to a staggering USD 355.9 billion ten years later, the major traditional retailers saw their market values drop massively. Sears, for instance, went from USD 27.8 billion to just (if you could call it that) USD 1.1 billion. The only exception is Walmart: while it also saw a drop, its scale and presence meant it only dropped 1% across the decade.
There are many factors, of course. For one, there’s been a trend away from big-box shopping centers and back towards standalone stores, especially for those who consider themselves with more discerning tastes. But these figures show the way online retailing has changed things, not just for customers but for retailers, too. And these are just American figures: the Chinese retailer Alibaba saw USD 20 billion in sales during its Singles Day sales last year.
It’s easy to see why online shopping is a force to be reckoned with. It provides us shoppers with a wider choice. We’re no longer limited to what our local stores have to offer. And we can shop wherever we may be, whatever time it is. Alibaba’s big numbers are in part because of the wide penetration of smartphones: Chinese shoppers can just pull up an app on their phone, browse with a few swipes, do a few taps, and wait for their purchase to arrive.
This isn’t quite the case yet in the Philippines, but already customers are spending idle time (stuck in traffic, perhaps?) pulling up shopping apps on their phone and browsing for offers. On one such occasion, my girlfriend showed me an irresistible offer: a box containing hard-to-find make-up and skincare products for a really cheap price. She did not buy it, though – she was saving up for Christmas gifts.
Last month I made my first ever online purchase. I bought a magazine from abroad – it was not available here, and I was not going to be abroad any time soon to buy it in a store. It didn’t matter that shipping costs were more than double the item’s price. I wanted the item, and the magazine store near the SCMAP office was not going to stock it any time soon (they told me so, I asked), so I punched in my credit card details (I was not using a phone) and hit send. The next three days was spent tracking my purchase as it flew from London, to Cologne, to Shenzen, and finally to Clark. It was fascinating to watch.
Is online shopping the new normal? Perhaps, most definitely. Retailers here are starting to look at their operations and wondering whether the costs of going online would be worth it. The Internet has allowed smaller retailers, especially niche ones, to tap into a wider market. It has also allowed bigger retailers to offer their products to more channels – like, again, that market of bored people stuck in traffic.
Online shopping, of course, has its own demands. A successful operation depends highly on an effective supply chain operation, handling multiple orders from any point, and able to fulfill them on time and with no damage to the product. This, however, comes with the risk of subpar customer service, where transactions are treated just like that, and the customer is left to fend for himself when a problem arises with the purchase – say, if it comes late, or with significant damage, or if it turns out to be a counterfeit product. Also, some customers still prefer to take their time in deciding what to buy, taking into account many factors. I, for one, take a long time to look for a new addition to my wardrobe. I look at the colors, I feel the texture of the clothes, I test whether it’s really a fit for me. No wonder Zalora has experimented with pop-up stores.
Online shopping has been called a disruptive force in the retailing industry, but it has also shifted the attention back towards the need for good customer service. Smaller retailers, in fact, have begun looking at brick-and-mortar stores as an experience – and bigger ones, like SM, have slightly tweaked their stores to exude more warmth and feel less like a big box. However, this is a difficult formula to get right. Some appreciate a knowledgeable person who can guide them through a store’s offerings, while others just want to browse in peace and not be disturbed. One thing’s certain: you can have excellent logistics, but if the customer’s had a bad experience with you, he may never go back again.
Henrik Batallones is the marketing and communications executive of SCMAP. A former board director, he is also editor-in-chief of the organization’s official publication, Supply Chain Philippines.