Adaptation 200 years after Darwin's birth

Sucharita Mulputu, VP and Principal Analyst. Forrester Research

The Stage of Retail Online 2010.

The Retail online performed better in 2009 than the rest of industry. She began by noting an interesting coincidence in dates. Charles Darwin's On The Origin of Species, was published in 1859. Its author was born in 1809.

One of the key observations in Darwin's book was that animals tended to adapt to changes in their physical circumstances. One such set of adaptations, exhaustively chronicled in the book, has to do with variations in beak structure among several species of finches found in the Galapagos Islands. These variations, Darwin posited, arose from differences in food availability. Birds with access to vegetables developed broader, stronger beaks, that enabled them to reach into narrow crevices and catch bugs.

Exactly 150 years later (200 years later, in the case of Darwin's birth), a chain of technological cand economic circumstances caused retailers in various segments, like Darwin's finches, to adapt to altered circumstances. "72% of surveyed retailers said online retailing was better suited to survive in times of stress than offline.This observation was echoed by online revenue growth results reported by the same cohort of retailers. As a group they reported 18% year-over-year growth for the fourth quarter of 2008 and 26% for 2009, significantly outperforming the retail industry as a whole. Which, though not exactly an apples-to-apples comparison, can still be construed as a bright spot in the somewhat somber landscape of 2009's retail sales. Forrester has identified a number of adaptations made by succesful online retailers in 2009, as well as some lessons that can be learned from them. One is remembering the 'world' in world wide web. If you look at global gross domestic product, 21% is accounted for by rest of the world, and in many cases, for example, emerging - and in many cases, rapidly growing - economies.

These same countries account for only 2% of online sales, which would seem to indicate a certain level of opportunity. Another adaptation is "respect for IT," by which she meant investment at a level high enough to actually make a difference. In 2008 IT spend was 2% of gross revenue in non-online retail and 3% in all industries. In web-based retailing it was 7%. Of that 7%, about 2% was spent on the same thing as the 2% spent by the rest of retail - replacing servers, upgrading software and otherwise keeping the lights on. The other 5% was thus available for innovation.

Online retailing also allows merchants to reinforce their partners and partnerships. The internet allows manufacturers to work with retailers to raise their profile and leverage brand loyalty; it also lessens the tension between manufacturers and retailers cause by private labels. Then there's reacting to "people power". The advent of social networking is having a huge influence on online retailing. Right now it's hard to quantify; even online retailers who like it and use it a lot are divided about what it does for them. Of retailers polled, 58% said the principal ROI is listening. What everyone seems to agree on is that it's not safe, or smart, to ignore it. Successful adapters realized there was a mobile revolution. Like social networking, the real significance of the nexus of mobile phones, the internet and retailing is still inclear - but there are some indications. One interesting point is that the United States is not a leader in this area. In a global survey of consumers, 58% of Japanese reported using the mobile internet at least once a month. In the United States, the figure was 16%.