E-retailing is growing and continues to take a larger bite out of total retail sales. For the first half of 2016, it is estimated e-commerce represented 8 percent of total U.S. retail sales. In comparison, for the same period for 2015, it was about 7 percent. Investments in technology are attempting to bridge supply chain components, including the warehouse to the store, website and mobile device in order to create a seamless experience for the consumer. However, it is coming at a price for many retailers. As online sales are rising, store sales are declining and as a result, retailers are shrinking their physical presence while enjoying a higher percentage of sales from online retailing. For example, for 2015, Macy’s noted its online business grew “double-digits” compared to its overall net revenues increasing 3.8 percent. As a result, Macy’s has been consolidating store locations, and in mid-2016, it announced plans to close 100 stores, about 15 percent of its total locations. Similar situations are occurring at other retailers. Kohl’s is also closing stores and Walmart announced a slowdown of opening additional stores. By 2020, there will likely be fewer physical stores.

At the same time, we are beginning to see e-retailers embrace physical locations. Amazon, for example, has opened popups, bookstores and locations on university campuses. In addition, there are rumors of Amazon building grocery stores with formats ranging from drive-thrus to actual neighborhood stores.

Alibaba also acknowledges the need for physical locations as it expects pure e-commerce operators to face “tremendous challenges.” In response, the company plans to upgrade retail businesses and improve efficiency across product manufacturing, and is working with partly-owned Suning Commerce Group Co. and Intime Retail Group Co. to integrate the online experience with brick-and-mortar shopping.

This combining of the physical retail location with that of online will gain momentum with both brick-and-mortar retailers as well as e-retailers through 2020. As a result, the supply chain will evolve even further to include more alternative last-mile delivery points as well as visibility across the entire chain.

For the consumer, personalization will become increasingly important through 2020. Consumers will expect real-time tracking of packages, redirection of packages to alternative pickup points such as lockers or the physical store and more. In addition, mobile commerce, which now represents 30 percent of U.S. e-commerce, will continue to grow and will require retailers, physical and online, to make necessary investments to incorporate mobile devices into supply chains. 

The Outlook

Beyond 2020, the physical retail store will look much different. No longer simply a place to purchase or return items, stores will be a destination for consumers to “experience” new products they can either purchase onsite or place an order. Physical stores will also be addendums to warehouses where employees will pick items from the store, pack and ship to consumer-identified locations. It will also serve as a last-mile delivery location where items can be picked up or returned.