On­line shop­ping: Why we ain't seen noth­ing yet

ASH­LEY BALLS EX­AM­INES WHY THE RISE OF E- COM­MERCE IS UN­STOP­PABLE AND IR­RE­VERSIBLE.

NZ Business - - TECH STUFF - ASH­LEY BALLS IS SE­NIOR PART­NER OF LEGALBESTPRACTICE. VISIT WWW. LEGALBESTPRACTICE.COM 1 In­di­vid­ual spend is cal­cu­lated by di­vid­ing to­tal e-com­merce spend­ing by an en­tire pop­u­la­tion, not just adults or those who have in­ter­net ac­cess. 2 Full de­tails can be

THE AR­RIVAL OF a box of new shirts from Lon­don set me think­ing – what are the likely im­pacts from on­line shop­ping? Has it changed the way we buy things? What does it mean for cus­tomer loy­alty?

Is con­sumer pro­tec­tion fit for e-com­merce and do prices/profit mar­gins re­flect what many per­ceive to be lower op­er­at­ing costs?

Be­fore set­ting out to an­swer the above ques­tions it might be use­ful to set out some ba­sic com­par­a­tive data on e-com­merce gen­er­ally, as it may well have an im­pact on those who are al­ready in re­tail busi­ness or plan to be. Un­for­tu­nately, there seems to be no sin­gle in­ter­na­tional source that com­pares data us­ing pur­chas­ing power par­ity and other mea­sures to en­sure com­par­i­son is straight­for­ward. The three pri­mary sources I have used are Nielsen for New Zealand data, Euro­stat for the EU and En­tre­pre­neur mag­a­zine for con­text.

The start­ing point is the value of e-com­merce to­day and to re­mem­ber that vir­tu­ally ev­ery dol­lar spent on web pur­chas­ing used to go across a counter in a ‘real’ (old fash­ioned) shop.

The data be­low cov­ers a num­ber of cur­ren­cies, has not been con­verted and is taken from the 2016 cal­en­dar year.

AN­NUAL AV­ER­AGE SPEND 1

The three big spenders are, in de­scend­ing or­der; Hong Kong, Nor­way and Is­rael where ev­ery cit­i­zen spends US$2,868, $2,448 and $2,171 per an­num. The next five are; USA, Den­mark, UK, Switzer­land and Fin­land. (Ev­ery Amer­i­can cur­rently spends more than NZ$78 ev­ery week on­line.)

Across the EU 55 per­cent of the en­tire 540 mil­lion pop­u­la­tion have pur­chased one of more items in the last year; in the top five more than 75 per­cent of peo­ple make reg­u­lar on­line pur­chases.

The most pop­u­lar on­line pur­chases in the EU are; cloth­ing/ sports goods (61 per­cent of the pop­u­la­tion) fol­lowed by travel, and hol­i­day ac­com­mo­da­tion.

In New Zealand the largest spend is travel, which may be be­cause travel des­ti­na­tions are fur­ther away and prices per seat kilo­me­tre are higher than in Europe.

The pro­por­tion of to­tal shop­pers us­ing the In­ter­net is grow­ing rapidly in the EU and else­where.

More than two thirds of those shop­ping on­line are com­fort­able with the ex­pe­ri­ence and in the case of the EU a third of to­tal pur­chases were made in an­other coun­try.

Ac­cord­ing to Nielsen, New Zealand has two mil­lion e-com­merce users3 who pur­chased 20.6 mil­lion items worth some NZ$4.7 bil­lion in 2016.

Most peo­ple agree that the like­li­hood of sales rev­enue ever re­turn­ing to tra­di­tional shops is zero, that is, the mar­ket for per­son­ally pur­chased items – 2 whether a bag of ce­ment, load of fire­wood, the weekly gro­ceries, cloth­ing, en­ter­tain­ment, travel and more, is gone for­ever.

Un­usu­ally New Zealand is some­thing of a lag­gard in e-com­merce, which could in­di­cate that rapid sig­nif­i­cant change is just around the cor­ner as Ki­wis play catch-up.

WHAT DOES IT MEAN FOR BRICKS AND MOR­TAR SHOP­PING?

How­ever I look at this, the pic­ture is not good and the strong im­pli­ca­tions are there will be demand for fewer re­tail out­lets, which will lead to lower rents and more empty shops.

Will prop­erty de­vel­op­ers take note? Don’t bet on it as they tend to use his­tory as a guide.

What about prices? The pic­ture is less clear as many tra­di­tional busi­nesses are build­ing an on­line pres­ence whilst re­tain­ing tra­di­tional out­lets. How­ever, once this is clear the on­line-only re­tail­ers have a dis­tinct ad­van­tage as they have no need for ex­pen­sive premises and can lo­cate any­where with good In­ter­net ac­cess and an abil­ity to ship goods to cus­tomers rel­a­tively eas­ily.

Some go even fur­ther and set up on­line vir­tual of­fices in third coun­tries, yet de­liver from an­other. UK re­tailer Marks & Spencer does this, rout­ing all its off­shore pur­chases through Ire­land with its 12 per­cent cor­po­ra­tion tax rate.

An­other fac­tor of on­line shop­ping has been the emer­gence of on­line price com­par­i­son sites which op­er­ate in the travel and re­tail mar­kets. I have yet to find com­pelling re­search that links these lower prices to in­creased cus­tomer demand as brand loy­alty to on­line sup­pli­ers who started out in the ‘high street’ still ex­ists.

Cus­tomer and brand loy­alty would ap­pear to have mi­grated with the change to e-com­merce as there is am­ple anec­do­tal ev­i­dence to sug­gest buy­ers are in­flu­enced by more than just the low­est prices. They want ser­vice, a good re­turns pol­icy, in­ter­na­tional guar­an­tees, speedy de­liv­ery, smart sim­ple web­sites and, above all, that goods or­dered closely re­sem­ble those dis­played on­line.

Would I con­sider in­vest­ing in re­tail busi­nesses or re­tail prop­erty? De­spite e-com­merce re­tail trad­ing laws be­ing in­ad­e­quate, no way.

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