It seemed that e-commerce, in all its myriad forms and social ramifications, had knocked out physical retail. A real hangover of online sales due, paradoxically, to the pandemic. But no: traditional shops, in this (almost) post-pandemic phase, have raised their heads again, forcing many big digital players to review programmes and investments. As demonstrated, among many others, by the case of TikTok Shop
Has the online sales binge passed? The strict lockdown imposed by the pandemic in 2020 forced people to buy online. The physical shop seemed doomed, its months numbered. Specialised platforms and fashion brands (from the smallest to the largest) had increased investment in digital because: ‘It’s the future‘. But then, with the restrictions loosened by Covid, consumers returned to the shops. The eagerness to buy online went away, and the big players in this market were forced to slow down their investment programmes. Or to reduce their growth prospects. The latest case is TikTok Shopping: a success in China, a flop in the UK. Moral: plans to extend it to Europe and the USA have, abruptly, ended up in a drawer.
Has the online sales binge passed?
In the decade before the arrival of the pandemic, online shopping had grown fairly steadily everywhere. Then came the pandemic hangover: everyone was buying (necessarily) online. Even those who had never done it before. And this was considered a great advantage because it had brought even those who had never tried it closer to digital shopping. The consumer seemed to have changed direction: everyone online (to the benefit of a few players) and physical shops were already smelling the incense. But in 2021, the world has gone back to its habits. In the US, for example, according to the Department of Commerce, in-store shopping beat online shopping by 18 to 14 last year. That is to say: Americans’ ‘in-person’ shopping grew by 18% by 2020: and remote shopping by 14%. A trend that looks set to continue.
The speed of a turnaround
Under the effect of the digital hangover, the big online players had accelerated their expansionist aims, budgeting billion-dollar investments. And now? Amazon claimed to have overestimated the online shopping mania’s duration and spent too much on building new logistics warehouses. At the end of June, Zalando issued a profit warning because customer demand slowed down. Richemont has long tried turning YNAP into ‘a neutral platform‘ without a controlling shareholder. It has been in talks with rival Farfetch, but there has been no progress on the deal for several months now. Then, ready to get their hands on the cake were TikTok, Meta (Facebook and Instagram), and YouTube with their shopping functions. According to data compiled by Statista, the turnover of social commerce will be $958 billion in 2022 and will be close to $3.4 trillion in 2028.
All in direct
Social platforms see live commerce as the future of shopping. A model that had worked for TikTok in China, through the Douyin app, to the point that rivals YouTube and Instagram had also started to develop similar functions in Europe. But the time does not yet seem right. TikTok Shop flopped in its test in the UK, its first market outside Asia. The Chinese success has not been replicated. Thus, ByteDance, the company that owns TikTok, has decided to abandon expansion plans in Europe and the US. Probably because it is still too early. TikTok denied this, but only because ‘there were never any concrete plans to launch in European markets in the first half of this year’.
In slow motion
Between 2020 and 2021, functions arrived on Facebook and Instagram, such as Instagram Shopping, allowing users to purchase products seen in posts and stories. But even here, investments are proceeding in slow motion compared to the initial schedule. As The Wall Street Journal explains, some retailers have reportedly achieved good results, but many have become ‘frustrated’ by certain technical limitations, to the point of abandoning the project.
What does fashion do?
The position of fashion brands in online sales is different. Investing in digital is one of many ways to show themselves and communicate with potential customers and/or loyal consumers. Whether the sale takes place online or in a shop matters little for the brand. The important thing is to cash in. Also, because the act of purchasing is only the finalisation of a process that started, who knows where. On multichannel today, Marco Palmieri, CEO of Piquadro, expressed a clear-cut thought. He questioned whether it still makes sense to divide retail revenues from online revenues, given that there is no process capable of establishing whether those who bought online did so after visiting a shop or vice versa. For the brand, it is more a question of logistics, distribution, and stock management. (mv)
Read also:
- Both online and onsite: post-Covid retail is onlife
- The new paradigm of fashion retail and its 4 challenges
- If they are not digital, shops become hyperphysical