Above my desk, on my office wall, are three small post-it notes with a date, country code and a percentage.
The data comes from thoroughly unexciting sources too: the US Department of Commerce, the UK Office for National Statistics and the Australian Bureau of Statistics – love ‘em. Generally speaking, these are apolitical government bodies that report on big data for long periods of time, so their numbers give you a strong trailing sense of the future — looking backwards to go forwards if you will. However, each individual country is definitely at a different point of time in its transition from physical to online retailing.
The statistics are online sales as a percentage of total retail sales in the US, UK and Australia. In the geographically tiny, but densely populated UK, online sales represents 17.4% of all retail sales. In the geographically huge but averagely populated US, online sales make up 9.5% of total retail sales. Lagging behind, dragging our school backpack, is geographically huge and sparsely populated Australia at 5.4%.
All three countries have significant transitional issues with mainstream traditional retail, as boards announce complete or partial closures of major retailers’ store networks. By way of example: Marks & Spencer closing 100 stores in the UK, and Toys R Us closing 800 US stores and 1,700 stores worldwide, with the loss of nearly 65,000 jobs. In the UK, high street store closures now rate their own chart in the print and online media. The UK Guardian newspaper asked its readers for ideas on: “How to save the High Street”. In 2017, US store closures ran at 8,000, a 100% increase on the number of closures the year before. In Australia, all the Toys R Us stores and up to 20% of Target’s retailing space is closing.
Well the backstory to the remaining retailers staying open is that all are renegotiating with existing landlords to lower rents. Current retail rental levels are untenable in all three markets; there’s simply more space than retailers need.
The second point is that accelerated online growth from the remaining retailers is crucial. Toys R Us in Australia was actually doing a very good job of growing online sales, but its physical store costs were too high and store sales were just declining too fast.
Thirdly, the online economy is spreading jobs and creating new business owners far more quickly than the old corporately-concentrated retailing model did.
In Australia, the ABS (again, God bless ’em) also reports on the number of companies we have. There are 130,000 ‘retail’ companies in Australia with no material change in that number year-on-year, even with a large number of store closures. There are also 150,000 ‘transport, postal and warehousing’ companies in Australia; up 26% or 16,000 in just the last year. Now in that new 16,000 there are 6,200 new Uber drivers, but the rest are in warehouses or on the road picking and delivering online shopping parcels to you and me.
Back to the future. As we run to play catch-up with the UK and US levels of online sales, our own proportion of online sales with likely reach 12% by 2020, doubling in 24 months. Amazon, Kogan, eBay et al will all continue to grow fast, as will small independently owned online and omni-channel retailers. Jobs and companies will grow in the services that support online retailing; jobs and companies will be lost in mainstream retail.
Oh, and retail rents will drop … a lot.