Three Retail Sectors Have Been Immune From The Ecommerce Push So Far: Here's Why

There’s been a lot of talk about how internet shopping is disrupting traditional bricks and mortar retail, but according to one industry expert, three product categories have been immune so far.

John Atwill, who owns and runs Sydney-based point-of-sale and retail merchandising company EDA, says e-commerce has made the biggest impact on travel, music, books, electronics and clothing purchases.

Those generally involve “big-ticket, generic items that can be bought on price”, he explains.

By contrast, he says people prefer to buy things like cosmetics and furniture in stores because they prefer to touch and feel certain products, while items that tend to be bought on impulse don’t quite have the same appeal online.

Here’s what Atwill has observed:

1. Cosmetics

According to figures from the British Retail Consortium last week, only 6% of products in the health and beauty sector were bought online, compared to 19.9% for non-food products overall.

As of October, Australian online retailers turned over only about 6.4% of the revenues of their bricks and mortar peers.

Atwill attributed relatively low levels of online cosmetics sales to how men and women tended to use moisturiser and make-up samples in department and variety stores before buying a product.

He expected online penetration to grow, but said a preference for bricks and mortar stores would remain – especially for products like eyeshadow and lipstick that came in a variety of shades that changed with fashion trends.

“If a consumer always buys the same shade of lipstick or eyeshadow, that could be a transaction that occurs online, but … [consumers] like to feel the consistency of the product or see the colour on their skin,” he said.

“Cosmetics are more personal [than clothing],” he added.

2. Off-the-shelf first-aid

Atwill highlighted small, first-aid purchases like band-aids and off-the-shelf painkillers as another category of products that would likely remain immune from e-commerce.

“These are impulse purchases in a supermarket, which are difficult to replicate online,” he explained. “People still like to physically shop.”

He acknowledged that this could change if online supermarket shopping became more popular.

Woolworths and Coles have offered online supermarket shopping and home delivery of groceries since 1998 and 1999 respectively but charge significantly more for online purchases, according to an SMH report in August this year.

Market research firm Datamonitor valued Australian online grocery sales at $1.5 billion in 2011, with the market expected to grow to $2.9 billion in 2016.

3. Furniture

Consumers also prefer to buy big, household items like couches in person rather than online, with online sales turning over less than 4% of overall household furniture sales revenue.

According to market researcher IBISWorld, Australians will spend $8 billion on furniture in 2013-14, including $298 million of online purchases.

“Products like lounges and chairs have lagged other areas [in online sales],” Atwill said. “If people are buying on price they can do it online, but to be honest, for chairs, it’s how it feels.”

IBISWorld expects online furniture sales to grow far more quickly than broader furniture sales in the coming years, with a 2013-14 growth rate of 22.3% versus 1.6%.

Atwill said retailers would adapt by creating “destination retail stores” for in-person visitors that would function as smaller showrooms, while processing a majority of transactions online.

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