lundi 17 mars 2014

The clock is ticking. We must act!

Last week, Internet Retailer, in collaboration with Optimal Payment, issued Canada's Top 20 Online Retailers. The report demonstrates beyond any doubt that the online business is doing well, very well indeed. Growth is phenomenal, year after year, and nothing indicates a slowdown on the horizon. So why write a blog about it?

After reading and analyzing the report, I conclude that Brick & Mortar businesses, whether they are an SMB or large enterprises, whether they sell to consumers (B2C) or businesses (B2B) they miss an incredible opportunity to sell (or to sell more) online and be among the best online sellers in the country. First, look at the results, then compare and deduce.

Download the report here

  • Twelve (12) companies are "Web Only" - they represent 60 % of the Top 20.
  • Of the total Web sales in 2012 (1,055,065,590$), these 12 companies generate 525,042,908$, or 50 % of total Web sales.
Consequently, Brick & Mortar businesses represent 40% of the Top 20 but still generate 50% of the sales. But what is most amazing is that if we compare the total Web sales in 2012 with the total Web sales in 2011:

  • The growth for the Top 20 was 27.91%
  • The growth of the Web Only companies was 14.63 %
  • But the growth of the Brick & Mortar was an astonishing 44.49 %
Another interesting finding:

  • Six (6) companies have their head office in Quebec: Beyond the Rack (# 2); Ice.Com (# 8) Aldo Group (# 10); Reitman’s (# 11) (# 13), 33-Off.Com (# 20)
  • Of these six companies, four (4) are Web Only.
What these data do not say

Through my work, I meet dozens of business leaders, from all sizes and industries. A majority have no idea on how to integrate - I would go even further – on how to merge the traditional business and online business to have a single well-structured company, able to sell more and better. They are overwhelmed with this.

What I witness in the retail industry is that leaders are concerned about the sales per square foot and the same-store sales ratios. Leaders are paid and measured in terms of ROI (private equity or public - is the same thing). Leaders are increasingly concerned that the growth of online sales (28 % per year) far exceeds the growth of traditional sales (often traditional sales decrease). So they try all sorts of tactics – somewhat expensive - to counter online sales. It's not very winning and it can put their brands at risk.

The other major finding is that they are afraid of the phenomenon of cannibalism. By attempting to sell online they are scared of compromising their in-store sales (same store sales) and thus weaken their profit margins to keep the stores open. Catch 22 isn't it. Notwithstanding all the organizational problems they face when transforming their business, for example, dealing with the reluctance of stores employees who see online sales as a direct threat to their jobs.

My advice

The clock is ticking. Leaders must act. To face the fact that 50% of online sales come from Web Only companies is not normal. Believe me, I applaud these companies with innovative ideas and entrepreneurs who see opportunities that Brick & Mortar do not see. It is to their credit.

But when we see that Brick & Mortar online sales growth (44.49 %) is three times the Web Only companies (14.63 %), it probably send a strong signal to Brick & Mortar business leaders: consumers want the best of both worlds. Give it to them! You are the only one capable of doing it. You will be winning all the way!

What is to do, and how to do it

Transform your business! It does take a lot of courage and strategy. The other day I wrote an article about Staples. (You can read the blog here). Staples in-store sales declined 7% AND while its online sales increased by 10%... and it will continue to grow.

On that note, I wish you good continuity in business! And do not hesitate to contact me to discuss about the transformation of your business model.

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