The retail industry has undergone a significant transformation due to many factors. These factors include changing consumer behaviors, technological advancements, and evolving market dynamics. The debate about which is better; brick-and-mortar or online shopping has intensified for the past few years. This article highlights the current trends, statistical insights, and future projections for both formats. Read below to learn about the future of retail.
Key Takeaways from this Article for the Future of Retail
- E-commerce growth will grow at an expected CAGR of 14.7 through 2025.
- Mobile commerce will dominate which will account for 72.9% of the total e-commerce sales.
- Customer experience will become paramount, leveraging AI and data analytics.
Current State of Retail
Brick and Mortar Store
E-commerce is growing at a fast pace and it has made its place in everyone’s lives. However, even with the introduction of e-commerce, brick-and-mortar remains a vital component of the retail landscape. In 2023, physical stores accounted for approximately 72% of the total retail sales globally which demonstrated their relevance. However, in the wake of the COVID-19 pandemic, foot traffic has seen some fluctuations. Retailers have now adapted to the changes by integrating technology, enhancing in-store experiences, and focusing on omnichannel strategies.
Online Shopping
Online shopping has experienced exponential growth with global e-commerce sales reaching $5.7 trillion in 2022 which was $4.9 trillion in 2021. This growth is due to ample factors including convenience, variety, and competitive price offerings by online platforms. The pandemic was one of the major reasons why this growth accelerated. In fact, there was an increase in first-time online shoppers and expanded product categories during the pandemic. By the end of 2024, retail e-commerce sales are estimated to exceed 6.3 trillion US dollars worldwide. Moreover, this figure is expected to reach new heights in the coming years.
| Statistic | Insight |
| Global E-Commerce market size- Projected to reach $ 5.4 trillion in 2025 | This means that e-commerce is not just growing but is reshaping global retail |
| Share of Global Retail Sales- expected to be 21.8% in 2025 | E-commerce will stress the urgency for retailers to |
| Number of Digital Buyers- Expected to hit 3.11 billion by 2025 | Mobile e-commerce is one of the most unstoppable forces that brands must harness for sales growth. |
Table Source- Statista
Consumer Preferences and Behaviors
Convenience Vs. Experience
One of the major factors for increased online shopping is convenience. Consumers can browse, compare prices, and purchase products from the comfort of their homes. A 2022 survey revealed 68% of consumers cited convenience as the top reason for shopping online. Other than that, price on online platforms is the reason why people choose online shopping over physical stores.
Conversely, brick-and-mortar stores offer tangible experiences. You can visit the store and inspect the product before investing your money in it. Other than that, the try-on makes it easier and more convenient than the hassle of requesting returns on online platforms for the future of retail. According to a study held in 2023, 55% of consumers still prefer to make certain purchases in-store to inspect the product quality firsthand.
Demographic Insights
Younger generations specifically Gen Z are more inclined towards online shopping. On the other hand, older generations show a stronger preference for physical stores. However, even younger shoppers appreciate the convenience of brick-and-mortar stores, especially for categories like fashion and electronics.
Technological Integration
- Omnichannel Retailing
With the increase in online shopping, retailers are increasingly adopting omnichannel strategies to bridge the gap between online and offline shopping. This approach provides a seamless shopping experience, allowing customers to interact with brands across multiple touchpoints. For example, in the past few years, a new concept has emerged; “buy online pick up in-store”. People have been choosing this option ever since it has been introduced.
- Augmented Reality and Virtual Reality
AR and VR technologies are continuously enhancing the shopping experience by allowing customers to visualize products in their real-time environment. For example, Amazon allows you to view certain products at your home so that you would know how that product will look before making a purchase. The AR market is expected to grow at an annual rate of 8.97% (CAGR 2024-2029), projecting a market volume of US$ 62 billion by 2029.
Challenges and Opportunities
- Sustainability
Sustainability is becoming a critical factor in the future of retail because consumers are becoming increasingly concerned about the environment. Physical stores have an advantage in reducing packaging waste, while online retailers are focusing on sustainable packaging. Apart from that, most online platforms are using carbon-neutral shipping options. Most people prefer products with sustainable practices.
Future Projections
- Hybrid Models
The future of retail is likely to combine the strengths of brick-and-mortar and online shopping. Retailers will continue to invest in digital transformation while enhancing physical store experiences. This means they will have to incorporate more experiential elements, personalized services, and integrating advanced technologies.
Market Growth
E-commerce is expected to continue its upward trajectory with global online sales expected to reach somewhere around $5.4 trillion in 2025(source-Statista).
Conclusion
Though online shopping has taken the market by storm, the future of retail will be characterized by a mutually beneficial relationship between brick-and-mortar stores and online shopping. While online stores have their benefits like convenience and affordability, physical stores will continue to offer unique, experiential value. Retailers will adapt both formats and adapt to changing consumer preferences.