Irish businesses have a window of opportunity to up their online game before Amazon strikes their home market, warns Wolfgang Digital’s Alan Coleman.
From a digital standpoint the numbers look encouraging. Irish online retail sales grew by 159pc in 2020, five times greater than the average annual growth between 2017 and 2019, according to new data from Wolfgang Digital in its ‘On The Money: The Irish E-commerce Report 2021’.
In 2019, 41pc of businesses generated upwards of €1m online. In 2020 the “one million plus” club became the majority (67pc). According to Wolfgang Digital’s data, the top 15pc of businesses captured 84pc of consumer spend. Lamentably, businesses turning over less than €1m are fighting it out for just 1pc of the e-commerce market.
“In our experience for every sale a business makes online, they make two more in-store from customers who started the journey on the website”
The precursor to this leap in digital transactions was the Covid-19 pandemic and a sudden rush by businesses to sell online to keep their business ticking over.
But don’t let the rosy figures blind you to the fact that change is coming.
The behemoth about to enter the room
For years Irish firms in general have been digital laggards and according to the IEDR only around 25pc have actual transactional e-commerce capabilities.
“The Irish e-commerce industry has been accelerating at double digit rates for over a decade now. Any retailers who have yet to establish an online presence have missed out on a decade of expansion”
The elephant – or behemoth – in the room is internet giant Amazon. As well as employing more than 5,000 people in cloud, software and data centre activities, the Seattle digital giant has plans to employ a further 1,000 in then next two years.
It has also been widely reported that it is looking at establishing fulfilment centres in Dublin and Shannon in what will be a major game-changer in the Irish economy. It already operates a warehouse in Rathcoole to serve Prime customers.
On one hand it brings our economy into what is a norm in most advanced economies in Europe and North America. On the other, with same-day deliveries and more, it could be a threat for Irish SMEs that failed to innovate and establish a lead online. That same day, same hour capability also presents an obvious existential threat to traditional retailers too.
There is a tiny window of opportunity – perhaps a year or more – for Irish businesses to go digital and establish themselves online before Amazon Prime steals their lunch.
In addition, Amazon’s fulfilment capabilities could be a boon for many businesses selling online, locally and globally, albeit they would no doubt have to surrender some margin to the digital giant in return for its reach.
According to Wolfgang’s data Amazon’s activity in Ireland has been temporarily reduced because the giant slashed its ad spend in Ireland by 50pc since Brexit.
Alan Coleman, CEO and founder of Wolfgang said that the time is now. He said that Irish businesses have seen a spectacular return on investment in e-commerce in 2020 and points out that while Brexit has undoubtedly posed a massive challenge to smaller retailers, Amazon’s move to temporarily halve its ad spend in Ireland is a massive opportunity for those businesses that can react quickly.
The online opportunity is bigger than the Amazon threat
Crucially, even with the arrival of Amazon, he believes the opportunity for firms that embrace online is still bigger than the threat. In short, it is all to play for.
ThinkBusiness caught up with Coleman to assess just how much of an opportunity there is for Irish SMEs to establish themselves online and get ahead of the obvious threat that Amazon and its same-day and in some cases same hour capabilities pose.
Would you agree Irish SMEs have only a window of time to build their online presence before Amazon establishes fulfilment centres in Ireland?
The Irish e-commerce industry has been accelerating at double digit rates for over a decade now. Any retailers who have yet to establish an online presence have missed out on a decade of expansion. Not just in online sales, but from customers who want to research online before purchasing offline. Will it get harder to get established when Amazon ups the ante yes. But at Wolfgang we believe the online opportunity is larger than the Amazon threat.
With Amazon reducing Google ad spend by an estimated 50pc, now is a great time to start winning those online customers that would otherwise be going to the Seattle based behemoth. The clock is ticking, however.
What kind of an impact does he think same-day Amazon Prime delivery could have for SMEs who are already on the backfoot when it comes to e-commerce and online shopping?
E-commerce represents about one in five retail transactions in Ireland. The majority of consumers still want to purchase in store, usually after researching online. So Amazon might be able to fulfill online orders faster than an Irish SME, but it’s only chasing 20pc of the market. The high street retailer can focus on the in-store experience that 80pc of shoppers still want and focus on how to create a great customer experience that starts online and then deliver shoppers to their high street presence.
In our experience for every sale a business makes online, they make two more in-store from customers who started the journey on the website.
Google and Facebook have fantastic advanced reporting tools which allow retailer track an in-store purchase back to an online interaction. Once a retailer sees the online impact on their offline sales they ramp up their online activity and their business grows accordingly.
By John Kennedy (firstname.lastname@example.org)
Published: 18 February 2021