Jack Ma of Alibaba and Wang Jianlin of Dalian Wanda Group, who was named China’s wealthiest person last year, made an enormous bet in 2012. Mr Ma wagered that online retailing would account for half of total retail sales in China by 2022, Mr Wang that it would not. Some RMB100 million / US$16 million is riding on the outcome.

The high stakes encapsulate both the promise and peril of online retailing. How much of a threat will it become, and what should bricks-and-mortar retailers be doing about it?

The answers so far are unclear. In 2015, three years into the bet, China had the world’s largest e-commerce market. Online sales accounted for 11% of total retail sales, up 42% from the year before. In the US they accounted for 8% of retail sales and in Europe 10%. But, as Professor Xiaojun Zhang of the Department of Information Systems, Business Statistics, and Operations Management pointed out: “Despite fast growth, online sales are still a relatively small percentage of total retail sales.” 

Professor Zhang has been looking at the role of IT in the retail industry and, at a recent Business Insights luncheon, outlined some of the challenges faced by both sides and the strategies they could take to grow. 

Online retailers should take advantage of customer preference for their low price and convenience and tailor their services to maximise these advantages. Apps are already being developed that compare the prices of products in stores with those online. “If an online retailer can tell you there is a better price online, it would attract you to buy online,” he said.

Convenience can be targeted by making it easier to buy and replenish goods. This is also already starting to happen. For instance, Amazon Dash lets people input product names or barcodes into a device that transmits the order to the e-commerce giant; delivery is often the next day. “This is part of Amazon’s internet-of-things strategy. In future you may not even need this small device – you can expect a smart chip to be built into products and the order to be placed automatically,” Professor Zhang said. GE has already started testing that out with a smart washer that automatically re-orders detergent and softener when it detects levels are low.

In the offline world, he suggested retailers capitalise on the fact that customers like to feel and try out products, while also recognising and accepting that these customers engage online. “One of the challenges they face is the sophistication of consumers. Customers don’t just go into stores, buy something and leave. They can shop using multiple platforms or channels – desktop, laptop, and now more are using mobile technologies like smartphones and tablets. They will even use their smartphone to assist them when they shop in a brick-and-mortars store to check prices and read product reviews. These are called the m-shoppers, for mobile phone-assisted shoppers.”

Professor Zhang suggested offline retailers take advantage of the technology to offset their disadvantages, which include higher prices due to more overheads and store service inefficiency due to staff never knowing as much as an online search engine.

For example, customers have been found to be open to location-based advertising so retailers could send them ads when they are nearby and announce special deals. Pricing could be made more precise by using big data analytic tools to better understand purchase habits. Digital coupons could be used to try to match online prices when customers scan product information, or to suggest alternative products in that price range. 

In-store staff could also be empowered with digital devices to help answer all kinds of customer queries – something already being done at Home Depot. And invisible watermarking could speed up the checkout counter by allowing the cashier to scan anywhere on the product. “That’s not the end of the story,” he added. “Eventually this technology will enable shopping carts to read the barcodes of products placed in them – it would eliminate the need of checkout registers.”

All food for thought and, as Professor Zhang concluded, only but a brief introduction to the examples and strategies that technology is bringing to the rapidly changing retail field.