All posts by Edoardo Righini

About Edoardo Righini

With a background in classical studies and law, Edoardo is a young digital copywriter with a passion for storytelling, especially around the theme of innovation.

impact of e-commerce in retail sector

Between growth and apocalypse: the impact of e-commerce in the retail sector

What is the impact of e-commerce in the retail sector?  The “retail apocalypse” that we’re hearing about refers to the flight of consumers from the big stars and stripes malls. In countries all over the world, there is talk of a “retail apocalypse” as consumers’ habits are taking them online and away from the shopping mall. Data suggests that businesses must change how they do business, perhaps taking advantage of digital retail, the only sector in the sector that continues to show double-digit growth.

Retail concerns all activities connected with the sale of goods and services by a company directly to the consumer for personal or family use are considered retail.

In other words, the term “retail” refers to commercial companies such as supermarkets, specialist shops, but also hotel chains, bars and restaurants, barbers, etc. whose core business is the sale of products or services to consumers, who benefit from them directly.

 

Not just physical shops

With digital transformation, the meaning of “retail” has gradually changed. It includes all those activities that sell goods and services to consumers without using classic physical shops. This is the case of e-commerce, the segment of the retail sector that is based on the transaction and exchange of goods and services carried out through the use of telecommunications and information technology.

Today, being a retailer doesn’t require a physical store; retail activities can be carried out even only in digital form.

Moreover, some of the most successful players in the sector, such as Amazon, operate primarily online, providing that a brick and mortar shop is not essential to create a successful retail business. In fact, many businesses—from big-box retailers to small boutiques— have a presence that is both physical and online. In this way, companies have the opportunity, via the internet, to reach a much larger number of consumers and thereby, greater profitability. 

Digitization has increased the ability of all retailers to grow their sales, and when the integration between online and offline is done correctly it is inevitable that this will trigger a real, virtuous circle.

However, this has not always happened, thus increasing the gap between traditional and digital retailers. This rift also manifests itself in the way retailers do business and how they react to changes and transformations in their market.

This is demonstrated by the fact that some retailers are showing signs of strong growth, while others are showing signs of greater fragility. Let’s look at some data to better understand these dynamics.

 

A litmus test

Let’s start by saying that the retail sector is considered by many as a thermometer to understand a country’s economic situation. In the expansive phases of an economy, in fact, the real or perceived consumer wealth increases and this leads to increased consumption. As a result, revenues for retailers in every sector increase.

Conversely, in times of stagnation or, worse, contraction, consumers tend to be more conservative and less inclined to spend: in such a case, the first to suffer are retailers, who see their revenues decline and inventories increase at the same time.

Retail sector is made up of many subcategories with specific characteristics that react differently to different situations, sometimes influencing each other. For convenience, therefore, we will limit ourselves to looking at three segments that are representative of the entire sector: large organized distribution (GDO), small retail businesses, and, finally, e-commerce.

 

GDO and retail: a near apocalypse

The first two categories are experiencing a similar trend, if only because they both move mainly in the “analog” world.

In order to understand what is happening, and what will happen, in Italy in the near future with regard to these two segments, it is always useful to look at the American market, which often and willingly anticipates the trends that then manifest themselves in Europe.

These fairly positive figures are, however, mitigated by others, which speaks to the volatility of smaller retailers. Between 2016 and 2017, about 90,000 small- and medium-sized shops closed; Italian retail is also experiencing (at least in some of its sectors) a delicate situation.

According to the latest Istat surveys, in January 2020, retail sales in Italy showed a zero change in value and a slight increase in volume (+0.1%).  In particular, food sales increased both in value and volume (+0.8%) while non-food sales fell by 0.4% in value and 0.3% in volume. Looking at the previous quarter (November 2019 – January 2020), the data is roughly the same, with a slight growth, below 1%.

Large retailers, on the other hand, are doing a little better, since the value of retail sales increased by 2.3% compared to January 2019. Large-scale retailing also comes from a four-year period (2013-2017) in which aggregate turnover grew to €83 billion in 2017, the best result since 2014, while there was a 5.5% decrease in net operating margin and a 5.9% decrease in net profit (repubblica.it).

What does all this mean?

It means that, while we are not necessarily facing a crisis, there are signs of stagnation, even in the face of partial market saturation. And if some compartments have shown themselves to be more lively, such as the discount channel, others are showing clear signs of suffering.

 

The remarkable growth of e-commerce

The picture changes, however, when we look at the growth rates of the third segment: e-commerce. This area has recorded the most remarkable economic results.

Starting from an international context, the value of the retail e-commerce market reached $2.875 billion in 2018, or 11% of the total value of retail sales, up 12% over the previous year. In Europe, the e-commerce segment is worth €313 billion, up 9% compared to 2017 (casaleggio.it). These numbers are just the tip of a trend.

In Italy, instead? Let’s see the impact of e-commerce in the retail sector in Italy.

 

E-commerce in Italy 

Also in Italy the digital sales sector is in a phase of net expansion, much stronger than in the other “analog” retail segments listed above.

This is confirmed once again by ISTAT, according to which e-commerce recorded +15.8% only in January 2020 compared to 2019, in line with a robust and steady growth that recorded +18% of turnover in 2018(istat.it).

Consider that, despite the growth, Italy lags behind many other European countries. The percentage of online buyers in other European countries is very high (93% in the United Kingdom, 91% Nordic countries and the Netherlands, 88% Germany, 84% Spain and France). In Italy, online consumers are “only” 38 million, or 62% of the population. 

This, however, has not prevented the e-commerce sector from generating a turnover of €41.5 billion in 2018, with double-digit future growth prospects.

 

Some final considerations

What can we learn from these numbers? What is the impact of e-commerce in the retail sector? 

First of all, the Italian retail sector is in a slightly different situation than the American sector, but this does not mean that there is an “Italian-style apocalypse” on the horizon.

More fragile at the moment is the traditional retail sector, which is showing more signs of stagnation than growth, but it is not necessarily the case that this condition is generated by the growth in online shopping. On the contrary, this could be the result of overall slowed growth in Italy, which is inevitably reflected in the retail sector.

In this sense, e-commerce and digital transformation could certainly have contributed to put some retailers in difficulty, especially smaller ones, just as happened years ago with the arrival of large shopping centers, which were said to have led to the demise of the city center “high street.” 

However, there is a substantial difference: the impact of e-commerce in the retail sector is important, but e-commerce, in addition to being a “threat”, can also be an incredible tool for all retail operators. Thanks to the internet, retailers can create a showcase to reach an infinitely higher number of people; it’s all about knowing how to do it right.

This does not mean that all stores must go digital, on the contrary. The best solution is more likely to be an integration: maintaining a physical space for contact with customers and implementing an e-commerce site or app dedicated to sales. Incidentally, the observation of digital retail could provide very interesting trends to follow and apply in the real world.

dentists and covid

Dentists and Covid-19 emergency: assistance through video

Dentists and Covid-19: The current health emergency has made dental practices face an important truth: there is a need to change the way they provide their services, introducing telephone triage into the process. What if the solution comes through a video?

The continuing Covid-19 emergency is changing and will change the way we do things for a long time to come. Even the simplest actions will be radically changed to ensure the safety of all citizens. Just think of the many social distancing measures that are still under discussion and which will have a major impact on many aspects of the economy, from tourism to retail and transport, both public and private.

Of all of them, one area that must not be forgotten is that of personal care: medical practices, specialist clinics, and so on. When we talk about doctors who are victims of the Coronavirus, all too often we forget that it is not only those who work daily in Covid wards and in the various resuscitations who are sensitive.

In addition to the many medical professionals who directly treat patients with Covid-19, there is also a large number of health professionals in other fields who routinely deal with patients and,  therefore, put themselves at risk. Doctors in medical practices of all kinds need to be able to guarantee the maximum continuity of all services to patients without jeopardizing the health of the professionals themselves.

But how can this be achieved, given that direct contact between doctor and patient is practically inevitable?

 

Intervene beforehand to be safer afterwards

Even if there is no substitute for direct contact when it comes to certain activities, there is potential for innovation with other activities. One of these is the preliminary phase, i.e. when the patient has not yet arrived at the facility. When practices can ensure that patients arrive safely, the risk of infection is significantly reduced.  But what does this translate into in concrete terms?

One solution is remote triage.

Before we explore this solution in detail, let’s start by providing some definitions. According to the Treccani Encyclopaedia, the term “triage” refers to the method of immediate assessment and selection used to prioritize treatment when there are many patients, or when there is an extra-hospital emergency and the severity of the patient’s clinical condition has to be assessed.

In other words, it is a process based on monitoring the patient’s vital signs by experienced nursing staff specifically trained to assess the patient’s symptoms, identifying life-threatening conditions, and, consequently, to assign a code of severity in order to prioritize examination. Usually, this type of procedure takes place inside the facility.

In general, triage activity is divided into three different phases.

  1. The first phase, reception, is where data such as vital statistics is collected on the patient.
  2. Next, the patient is assigned a specific code according to the severity of the situation; from here on, the actual sorting takes place.
  3. In the third and final phase, the patient is monitored to periodically assess the suitability of the assigned code, based on the level of severity identified in phase two.

 

How Covid-19 changes triage

As part of the assessment, healthcare staff must carry out a series of operations in close contact with the patient. In order to avoid or reduce this type of contact, in Italy, the national health service provided direction for doctors to perform triage over the phone (salute.gov.it). The Ministry of Health website advised professionals to increase their availability via telephone to patients with flu-like symptoms in order to avoid bringing patients who were ill into the practice.

This approach, which at the time was limited to family doctors, has also been adopted by other categories of health professionals, such as dentists, over time. 

A few days ago, the national association of Italian dentists (ANDI) issued a document of guidance for dental clinic activities during the new phase 2 of the pandemic, since a large number of dental visits were cancelled or delayed as a result of the emergency (insalutenews.it).

 

Dentists and Covid-19: Measures to reopen 

It should be pointed out that this type of information is not only intended to manage an emergency and therefore to regulate access, but also to enable professional services to be carried out safely. For this reason, the same indications have a much wider application than the simple telephone triage. Let’s start from the top.

The first phase is that of telephone triage, where the professional has a fundamental role because he must be able to understand the patient’s situation and make the right decision. As Dr. Mario Bussi, head of Otolaryngology at San Raffaele Hospital in Milan and President of the Italian Society of Otolaryngology and Head and Neck Surgery (SIOeChCF), said, “The direct relationship is fundamental: the doctor must also dissuade all patients who can do without the visit, giving advice to resolve the situation, at least temporarily, at home.” 

But how should this triage take place?

The structure is that of the telephone questionnaire, in which some questions are asked to understand the patient’s situation. Questions include those to understand if the patient has travelled to high-risk areas in the last 14 days, if he has come into contact with people in quarantine or if he has had symptoms such as fever, conjunctivitis, breathing difficulties, diarrhoea, or flu-like symptoms over the last 14 days.

If even one of these questions is answered in the affirmative, the examination should be postponed to a safer period, during which the patient should be monitored by telephone to see how his condition develops.

Also, in this case, it is interesting to observe what has been established for the dental sector, in particular by the AIO, the Italian Dental Association, which recently published a guide of practices to avoid the spread of contagion, taking its cue from the indications previously provided by ANDI and the national association of dentists.

Among the various provisions, there is one concerning the waiting room, which must essentially disappear. For this reason, it is advisable to organize appointments to avoid having more than one person in the waiting room at a time. This also reduces the “risk” of patients touching objects or surfaces inside the practice.

For the same reason, operators inside the facility are instructed on the use and disposal of PPE (personal protective equipment, such as gloves, masks, and headgear) and instructed to wear them for as long as they are inside the practice, also for performing administrative functions. In this sense, effort may also be required from the patients themselves. Once inside, patients must have their temperature checked. They must also be provided disposable protective materials and a disposable bag in which to place all their belongings; the patient must take this bag with them after the appointment.

Digital transformation can also contribute

The key to the entire procedure is telephone triage, the proper completion of which is the very premise of all subsequent measures, which depend on being able to identify if a patient has potentially been affected by Covid-19. As a result, this procedure is of fundamental importance. 

However, such responsibility is certainly not easy to manage, especially at a time when working schedules are reduced and when employees are under increased stress. Is there a way to avoid putting the “weight” of triage on professionals without sacrificing the reliability of the result?

One answer could come from digital transformation through the implementation of solutions related to telemedicine.

An example comes to us from the United States. The case in question involves Google, who has developed resources to answer questions from Americans about the epidemic, offering data and insights, safety tips, and information about testing. With the Alphabet company Verily, it has created Project Baseline, an effort to expand access to testing and screening for Covid-19. According to the website, it is a connected and secure solution to support individuals from screening through testing and receipt of their test results, which is done under physician direction. Unlike a simple digital screener, this connected solution enables follow-up with individuals who are screened for future testing based on changes in screening criteria. The program is currently operating in California but has plans to expand to other states. 

 

Triage becomes video (customizable)

Although in our country there is still no Google equivalent that has invested in such a project in Italy, there are equally interesting alternative solutions.

The personalized videos made available by Doxee offers one potential solution. Doxee Pvideo® is product that brings out the richness hidden in customer data, transforming it into personalized, interactive video experiences. With it, it is possible to create individual videos based on the data of each recipient. This means that each user, or in this case, each patient, can be reached by a video where all the elements (from graphics, to text, to audio) are perfectly tailored to the viewer and their unique situation.

The video could be sent a few days before the appointment, reminding the patient about the appointment and inviting them to fill out a short questionnaire similar to the one made by phone.

This is possible because Doxee’s personalized videos offer a personalized narration through the Dynamic Storyboard, a function that allows you to show or hide individual scenes according to the recipient’s profile, adapting the narration to their characteristics.

Among other things, Doxee Pvideo® makes it possible to integrate interactive tools that allow the user to perform different actions from within the video. This would make it possible to transform the telephone triage into a digital triage, within the context of appealing visual content.

Innovative communication of this type—which is simultaneously effective and engaging—offers another advantage: It can help improve the relationship with patients. The personalization features make patients feel understood and this leads them to have greater confidence in the practice and its commitment to providing them with a safe and tailored service.

This, of course, has a positive impact on the reputation of the practice and, as a result, on its ability to attract new clients and build loyalty. Another advantage of videos as a communication mechanism is that it makes communications trackable, which saves time on the administrative side. 

And that’s not all. The greater traceability offered by this tool is a key aspect, since it allows you to monitor all your patients, creating a real database of information that you can constantly update, to the benefit of the health of operators and patients and the safety of your workplace.

media and entertainment digital transformation

Media and entertainment: each segment has its own digital transformation

The media and entertainment sector is made up of several segments, each of which has reacted differently to digital transformation, with some taking advantage of it, while others have not had positive results. One thing is certain, none of these areas, after this revolution, will be the same as before.

Media and entertainment sector is a diverse sector. It includes a large number of segments (books, radio, television, etc.) that have very precise and diverse characteristics.

This means that what happens within one sector is not necessarily reflected in other sectors; in the same way, every sector will not react the same when a transformation occurs. This is exactly what has happened with digital transformation.

Digitization has brought about considerable changes in most every industry. In sectors like finance, food, and banking, these changes are mostly homogenous and largely depend on an individual player’s ability to adapt to innovation. This is not the case with the media industry. Here, the changes can be very different from one segment to another.

 

Radio: still going strong

To kick-off, let’s look at one of the most long-standing forms of traditional media: radio.

Radio continues to be a relevant form of media, not only because of the number of people it can reach, but because it is a sector that has shown a certain flexibility.

Digital transformation has affected this sector only to a limited extent, at least according to data reported by Ter-Tavolo Editori Radio on the audience of national and local radio stations in Italy, which seems to be growing compared to 2018 except for some limited cases (such as RDS, Radio Italia, RTL 102.5, Rai Radio 1, and a few others).

Net of statistics, the radio sector is interesting to observe because it has undergone considerable changes, since, perhaps more than other sectors, it has been receptive to change.

One such change is undoubtedly the birth of the web radio phenomenon. The main radio stations also have a digital platform that runs its program schedule live or makes it possible to view some broadcasts on demand. This has allowed the different radio stations to increase their audience, giving many more people the possibility to enjoy their content, also using different devices.

One of the main effects of digital transformation was, in fact, just that: to make it possible to listen on other devices, not initially designed to perform this type of function, such as smartphones, personal computers, or tablets.

Another trend brought about by digital transformation is the podcast, an extremely successful platform that delivers audio files with diverse content, accessible via mobile apps and online channels. By their very nature, podcasts are complementary to radio that enriches the listening experience for users, who can choose between a linear or on-demand use. Podcasts have revolutionized radio also because they allow listeners to personalize what they listen to, making them absolutely free to choose what to listen to, when and how.

This has also been made possible by the fact that there are now hundreds of dedicated platforms and applications where users can browse and download the podcasts they are most interested in. All of these aspects have made podcasts popular, and the type of content has become increasingly relevant for the radio industry.

This is reflected by the fact that major Italian publishers and advertisers (among others) are incorporating them as part of their own digital audio strategy in order to take advantage of these opportunities.

Digital Audio, which refers to this new sector of Media and Entertainment content, has become a considerable source of additional revenue compared to the traditional model of advertising sales. Suffice it to say that, in the United States alone, estimated revenue for 2020 could represent about 30% of total investments in radio, compared to about 20% in Europe (lastampa.it).

 

Books: paper beats digital

Given the above-mentioned trends, you might think that an area such as books and publishing would have been negatively affected by the digital transformation. Instead, publishing is one segment of the media and entertainment sector that is showing positive signs of growth.

PWC forecasts that the market for books in Italy will grow by 0.2% between 2019 and 2023, ensuring a level revenue of around €2.2 billion (pwc.com). This is despite the fact that Italians continue to consume traditional books, preferring to read a printed volume rather than buy its digital version.

The e-book, in spite of its good starting points, has never made it into Italy. Suffice it to say that, between 2010 and 2016, the digital book market reached €67 million, which corresponds to about 5% of the market, and in 2018 the same sector decreased by 17.2% (key4biz.it).

However, a very interesting trend, which is already quite widespread in other countries, namely self-publishing, has also arrived in Italy. Digital transformation has allowed the formation of numerous dedicated online platforms, where an author, without the intermediation of the publisher, can publish his work directly and sell it either through these platforms or from physical points.

Thanks to this “democratization of publishing” made possible by digitalization, more than 11,600 self-published ebook titles were offered in Italy in 2018, equivalent to 22.8% of digital publications.

Another effect of digital transformation is an increase in the number of examples of the use of books through other media. One example is that of audiobooks, which thanks to the popularity of podcasts, are becoming more and more popular, to the point that more than 4 million Italians listen to audiobooks.

Another example, instead, was the presence of Netflix at the Bologna Children’s Book Fair, which according to experts, marked the beginning of a “fascinating dialogue between the book, the screen, tradition, and the future” from which it clearly emerges that what you see inevitably influences what you read.

 

Not a good time for newspaper

The books segment is less well off than the newspapers and magazines segment, which continues to show signs of suffering, although this is not necessarily related to digital transformation. On the contrary, the latter could offer interesting opportunities to relaunch the entire segment.

For example, publishers can create an online version of their magazine in order to increase your audience and meet the needs of users, who increasingly need to access the content they prefer how and when they want. This is exactly what many leading national and international newspapers and periodicals have done, sometimes recording better market performance than their print version (primaonline.it).

The path to follow, then, is this one, all the more so if you think of the – decidedly positive – economic results that major US newspapers like The New York Times, The Boston Globe, and The Washington Post recorded when they decided to reduce the perimeter of their paywall by reducing the number of articles available for free. Thanks to this courageous choice, newspapers have recorded an increasing number of subscribers to the digital-only model, which reached 2.5 million users and led to revenue growth of $1.68 billion compared to $1.56 billion the previous year.

This strategy has allowed us to face a problem that the media must manage: that of credibility. In fact, some of the more negative aspects of digital transformation, from a competitive perspective, is the increased amount of sources from which people can get information.

While this has led to an increased number of online-only publications, at the same time, the chances for a user to run into false news have increased; just think of the problem of fake news, which often spreads virally because of social networks.

“Forcing” people to subscribe allows newspapers to gain status among users and, equally important, ensures that increased freedom on the internet does not affect the quality of the products provided to readers.

 

Television is still king

Despite digital transformation, television in Italy remains one of the most relevant, if not the most relevant media for penetration capacity. It is no coincidence that, according to Censis, more than 90% of households have at least one television set and 86% of those interviewed said they watch television at least once a day.

Despite this, television has also undergone a digital transformation, and, in its own way has begun to show the signs of digitization.

The first of these is the arrival and affirmation of streaming television. All the main networks have already planned to transmit part or all of their programs on digital platforms, so as to allow users to enjoy the content at all times and especially from mobile. This is particularly important in light of the fact that the smartphone is one of the most widely used tools for surfing the Internet and that one of the most prevalent actions is watching video content. The relevance of these platforms, among other things, is demonstrated by the fact that Auditel-Censis has also begun to take an interest in these new dynamics, reporting on the number of people watching television in “non-traditional” ways in 2019 (auditel.it).

A second effect of digital transformation has been the emergence of new competitors in the market, which have revolutionized the way that a television product is conceived. Here, we’re talking about giants such as Netflix, Amazon Prime Video, and Disney Plus, which have made on-demand the main mode of video and which, moreover, have created new social phenomena such as binge watching, imposing seriality as a winning format in terms of narrative and market.

Another aspect is the new complementary effect between television and other media. For example, think about what happens on social networks during major television events such as Sanremo or the Oscars. On these occasions, the network becomes a natural meeting place, where people exchange views, opinions, and memes about events they are watching through another media.

In some cases, real listening groups are organized for live commentary on events, which enables new forms of connection, making television more than purely a passive form of entertainment. It is no coincidence that Facebook has experimented with a specific chat mode, the Facebook Watch Party, which allows users to watch and comment on videos directly with friends, facilitating interaction while viewing content.

 

Some news

Digital transformation has also given impetus to some emerging sectors that are becoming increasingly relevant.

This is the case, for example, of gaming, which has found a very promising segment in e-sports. Although revenues from this segment in Italy are still below the level of other countries, PwC expects the Italian consumer e-sport market to grow significantly, with a CAGR for 2018-2023 of +51.6% (engage.it).

The same thing, although not at the same rate, will also happen for the augmented reality sector, which is expected to grow by about 23% in the same period.

It is easy to imagine that these areas, precisely in light of these perspectives, will become important in the future to stimulate the creation of new types of content and will push the different players to innovate on the current models of entertainment.

retail industry definition

Retail industry definition: distinctions between brick and digital

Retail is a vast sector, ranging from department stores to coffee machines, from the town square to the digital storefront, from the most promising transformations to possible apocalypse. In this post, we’ll explore the retail sector and its unique characteristics.

The retail sector is often said to be one of the most important for a country’s economy because it is a sort of litmus test of an economy’s level of well-being. In a healthy economy, there is high production and, consequently, wealth is reflected on consumption, most of which is concentrated in retail. For this reason, in times of crisis, one of the first sectors to contract is retail, which immediately suffers: consumption is reduced and, consequently, operators who base their business on the sale of food or consumer goods see their revenues fall, with resulting repercussions on employment.

Given that retail plays a key role in developed economies, one thing should not be taken for granted: what do we mean by retail? On closer inspection, this segment is much more complex than you might think, also in light of the enormous changes that have occurred in recent years due to digital transformation.

 

Retail industry definition

Let’s start, then, by defining the term “retail.”

By “retail” we mean the market that includes all those activities that involve the sale of goods or services by a company directly to the consumer that are usually purchased for personal or family use.

Retailers can be both retail and institutional. Both have one thing in common: they involve a high number of small transactions. Instead, the wholesale market operates between businesses (and not individual consumers); some companies carry out both activities simultaneously.

In Italy, if you search the web for retailers, the most cited examples are large companies like Coop, Esselunga, and Coin, all of which are large-scale retail stores, but not necessarily a representative example of the variety of retailers that exist. In fact, there are retailers of many sizes who sell a variety of goods. This brings us to the next point: retail is an extremely varied segment.

 

One sector, three segments, 5 types of activities

Usually, the activities included in the retail market can be distinguished in three different macro-areas:

  1. Food products, which includes all the activities that distribute food and related products to consumers
  2. Consumer goods, which includes all the activities that sell products, many of which can be reused over time
  3. Durable consumer goods, which includes activities that provide consumers with longer lasting products such as household appliances, furniture, or cookware.

Obviously, this is not the only distinction that can be made within the sector.

While it is true that retail is a B2C market, there are many ways to achieve this. In light of this, it is possible to make a further distinction within the retail sector. If we look at the different types of retailers, we can list at least 5 different types of activities.

  1. The first is the so-called “fixed location” retail. This refers to the classic shop where products can be purchased. Generally, this type of retail can be found along street streets or in shopping centers.
  2. The second category of retail is supermarkets. In this case, the type of products that can be purchased is much wider, ranging from household items to technology and food.
  3. The third category is discount stores. While discount stores are similar to supermarkets, this category tends to be more food-oriented and typically offers “off-brand” goods, which are sold at retail and generally at lower prices than the supermarket.
  4. The fourth category is temporary shops. Such types of business may only be open for a limited period of time, usually in high-traffic areas. This is because temporary shops are often part of a marketing strategy, where they have the role of a physical touch point that serves to launch a new product on the market or to consolidate a certain brand.
  5. The fifth category is vending machines. In this case the store is practically non-existent and the service is completely automated. The interesting thing is that, compared to the past, the types of products that can be purchased from vending machines have increased; they range from food, pharmaceuticals, to small items.

If these are the main, and traditional, retailers in operation, we cannot ignore that new, increasingly important retailers have entered the market. 

 

Welcome to the digital square

With the arrival and popularity of the internet, retail has also adapted to take advantage of the great opportunities offered by digital transformation. In response, two additional categories have been added.

The sixth category is that of internet retail, which basically consists of e-commerce, i.e. platforms where you can browse and buy the products you are looking for and have them shipped to you.  On closer inspection, and in some cases, these platforms are nothing more than the digital extension of physical stores and, it’s no coincidence that many retailers envision the integrated use of traditional and digital sales channels in their business, so as to increase the number of consumers who can theoretically buy and, at the same time, reduce inventories.

The seventh category, in reality, can be considered a part of the sixth. We are referring to mobile retail, businesses based solely on a smartphone app that allows the immediate purchase of products without the need to access a website. Also in this case, as with e-commerce, it is rare for a retailer to have mobile as the only sales channel.

In general, the trend is to integrate the different retail categories as much as possible, thus guaranteeing the consumer the possibility to buy both in the physical store and online.

It would seem that digital transformation has been positive for retailers, since the internet makes it possible to sell more products to a much wider, even global, audience. However, this is not necessarily the case. 

According to recent surveys, more than 50 million—9 out of 10— Italians access the Internet, a number that is growing year by year. Of these, 93% have visited at least one online store from any device and 77% of them, last year, purchased a good or service online, using a personal computer or smartphone.   Against these statistics, it is not surprising that this year, the value of consumer goods purchased on an e-commerce platform has further increased compared to last year, reaching $15.83 billion, while the average per capita spending remained substantially unchanged at around $400 dollars. Similarly, the number of people who purchased goods online in 2019 is also growing steadily, with more than 39 million consumers.

Therefore, everything would suggest that retail is one of the few, if not the only, sector to have benefited from digital transformation, unlike sectors like banking, finance or, above all, telecommunications. But, this is not necessarily the case.

 

The usual difficulties

It is undeniable that the pace at which digitization is growing in Italy and around the world has significantly accelerated this particular retail segment, which continues to grow.

Even in Italy, e-commerce has grown by 30% and the trend does not seem to be stopping. Compared to 2015, this year, the revenue generated by the entire e-commerce sector in Italy grew by 140% and it is expected that by 2023 there will be further growth in all segments, but especially in electronics, clothing, food, personal care products, and household appliances.

However, this does not mean that traditional retail is in the same condition.

For some time now, smaller retailers have been suffering from competition from supermarkets and large-scale retailers in general who cannibalize the market. In addition, digital transformation has also opened the way for new competitors who threaten both the small neighborhood store and the large retail giant.

For some time now, we’ve been talking about the “retail apocalypse,” which refers to the “flight” of customers from physical stores in favor of e-commerce. This phenomenon is particularly evident in the United States, where an entire website is dedicated to recording all of the “dead” shopping malls in the country. Although the issue has been minimized by some economists, it is undeniable that the sector has suffered. For example, in the US, shopping center visits have decreased by 50% between 2010 and 2013). Even Italy is beginning to think about a possible “Italian-style retail apocalypse,” which underlines how shopping center revenues have decreased from a maximum of 6.4% to 5% in 2019.

 

But is e-commerce to blame? 

It is clear that this situation can hardly be attributed solely and exclusively to the advent of e-commerce.

In this sense, external aspects, such as the progressive slowdown of the economic recovery recorded in recent years, and aspects related to the taste and habits of consumers, who increasingly seem to prefer personalized experiences, online or offline, have also influenced this, and this may have led them to “rediscover” smaller and less “serial” retail.

In any case, what is certain is that digital transformation, if used properly, can become an incredible opportunity for all retailers, especially smaller ones, who can reach many more customers and make their products known in a much more effective way. Also, the consumer appears receptive to this type of transformation.

The challenge, then, is all for market players to understand how to change in order to take advantage of digitization. It is certainly not a simple challenge, but there are some guidelines that you can take and some trends that you can follow to try and ride the market. We’ll be covering this topic in an upcoming post. Follow us on social media to stay up to date with our next posts.