Is Ecommerce the death of Bricks and Mortar Retail?

I chaired the Digital Retail Conference (DRC) in Joburg on 29 Jan. One of the many interesting discussions centred around the effect of online on offline retail. Recently one of the online newsfeeds had reported that: -“The demise of some Massmart stores, including electronic devices retailer DionWired, is a direct result of thriving online business. This is according to analysts, who say online sales are growing at far higher rates than brick-and-mortar sales, causing a steep drop in business at physical stores.” Unfortunately, these analysts were not named. Attendants at the DRC agreed that online competition is the least that bricks and mortar have to worry about in SA. The main problems were too many competing shopping malls within close proximity with almost the same shops, and therefore very little choice for the customer; chasing the same consumer and depending on short-lived popularity. The absence of specialised shopping experiences (eg Ikea); very little competition on price (few US-style discount centres) and a sluggish economy.

This debate has come after retail group Massmart announced that it planned to close 34 DionWired and Masscash stores. Massmart has joined a long list of companies to fall victim to the poor-performing economy. Stats SA’s April 2019 Statistics of Liquidations and Insolvencies painted a dire picture of the economy. The number of business liquidations increased by 53.1% between April 2018 and April 2019. The number of insolvencies increased by 30.1% between March 2018 and March 2019. Blaming ecommerce for the demise of Dion Wired and Maasscash is, as President Trump would say, “fake news”, and “a witch hunt”!

On the other hand, despite the number of active online shoppers steadily increasing over the last year, some online retailers are failing to maintain relevance in an increasingly monopolised sector.

This is according to the 3^rd  edition of the Brand Finance Global 500 report, released at the World Economic Forum (WEF) in Davos. The report, which pointed out that Amazon broke the US$200 billion-value mark as the most valuable brand across the globe, also found that brands operating in the ecommerce space are seeing contradicting results. The Report points out that 44 retail brands feature in this year’s ranking alongside Amazon, with a combined value of nearly $800 billion, makes the retail sector the 3^rd most valuable behind tech and banking. Some online retailers have started to lose brand value, while those  bricks and mortar chains which have learnt to successfully adapt to the changing marketplace, are consequently successful. As an example of the reduction in online successes,  eBay’s brand value has dropped 9% to $8.2 billion, although the number of active buyers steadily increased in 2019, reaching 183 million. eBay is failing to maintain relevance in an increasingly monopolised sector. Some brands are also moving away from the big e-platforms.In November 2019, Nike announced it would no longer sell its merchandise on Amazon, and will develop its own direct sales channels.This indicates a trend.