Comment: Online retail can cause dilemmas for retailers

Digital retailing made Christmas for the industry, it seems.

While December was not a bloodbath for retailers, the pace of growth of online sales dwarfed those achieved in store, the British Retail Consortium’s December figures revealed.

Today an online offer is part of the entry-ticket to retail, and mainstream retailers whose bricks are not complemented by clicks are at an increasing disadvantage.

Morrisons, conspicuous among the big grocers for not selling food online, was one obvious casualty of the trend as festive like-for-likes tipped into the red.

But while retailers will take sales growth where they can, especially in what are likely to be continued tough times for consumers, the shift is not unalloyed good news.

Digital retail still brings challenges as well as opportunities. There are margin implications, for instance - they are frequently lower online.

And while click-and-collect has proved immensely popular with shoppers, uncomfortable questions about what that means for retailers’ estates have not yet been fully answered.

The expectation is that Morrisons will launch an online food business this year. It has to. While essential, the digital business is unlikely to remedy things on its own.

Competition in food retail is ferocious, and the likelihood is that Morrisons shoppers have sought out what they see as better value from rising powers such as Aldi or traditional foes Asda and Tesco.

In a food sector note, broker Investec cautioned: “Remember that overall industry volumes are flat, that internet sales are growing rapidly and that the internet is less profitable than store retailing. Therefore the growth of the internet logically comes at the expense of in-store retailing and is value destructive to the industry.”

The inconvenient truth is that most retailers can’t live without online, but haven’t quite worked out how best to live with it.