In a lot of the financial retail presentations I have followed recently, there has been much discussion about the growth of e-commerce in f.k.a. Brick and Mortar retailers (now known as seamless brands or a variation on this theme !). One of the areas I have been researching in recent years is the growth rate of the e-commerce or digital commerce as a percentage of total revenues. While this is not necessarily an SEC mandate it is published for several retailers to let the investment community know how successful they are at adapting to this digital world.


In many companies I have analyzed there seems to be a trend that the growth of e-commerce is not translating into better overall performance in same store or comparable sales growth. Even in cases where e-commerce is growing in the 30% rate it still seems to lack a large impact on absolute positive sames store sales growth. Granted in a lot of cases this is building of a low base figure and therefore takes significant time to realize returns. Just ask Amazon about capital investments to achieve growth !


The area that struck me as interesting was that it is likely that the direct shoppers are not venturing into the store to shop and engage, at least not in enough numbers to move the needle on absolute growth. This is a different scenario than often covered vis-a-vis the supply chain aspects of omni-commerce which are well documented to date e.g. buy online – pick-up etc.


If we consider the large capital investments in e-commerce required to bolster growth it would seem that the conversion of these digital shoppers into digital and physical hybrid shoppers is the key. I know there has been several case studies released that show this payoff in test/control cases, however I am not seeing the conversion happening to match the scale of the investments.


I am including a chart of one retailer to emphasize this point. I have left the name out as it is just illustrative of the trend I am seeing. Basically e-commerce sales are growing (not in chart) 20% + yoy and represent > 10% of annual revenues. At the same time absolute market share is eroding as judged by shrinking absolute same store sales. In this case a significant amount of capital expenditure was spent growing the e-commerce.

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I think the conversion of the digital shopper in larger numbers is the key to realizing returns on these investments. This will most likely require a sustained effort between digital marketing groups and merchants which although is happening in a lot of cases, is not happening at sufficient scale or time horizons to satisfy the investment community.


I would welcome any feedback or cases where this is not happening, I have been impressed personally from an outside in perspective with the Restoration Hardware story and how they are creating a hybrid (digital & physical engagement) customer who engages in scale at every brand touch point.


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