Retail Renaissance: Death of online?

3 key takeaways

The days of exponential online growth are over.

The new norm is of online broadly tracking overall retail sales, but with erratic and seasonal monthly swings.

The online market is subject to evolutionary structural change.

This comes with a whole host of moving parts, the key by-product being that multi-channel is growing far faster than online pure-play.

Multi-channel operators are now at scale with their online infrastructure.

This is freeing up investment and capex for physical stores, with-enchanced capability.

For too long, the narrative around online has been simplistic at best, deeply erroneous at worst.

The embedded notion is that online is a merciless, omnipotent force against which the high street is powerless to compete. This notion is unravelling. Fast.

Online penetration figures are widely quoted, but are increasingly nebulous. Online penetration was just shy of 20% (19.2%) in 2019, the last full year before the pandemic. Having hit a monthly high water mark of 37.2% in February 2021, penetration rebased to 25.7% and has subsequently fluctuated between 26% and 28% - and will continue to do so indefinitely. We now know that the online market is highly seasonal, the peak month for online unquestionably being November (11.3% of annual spend).

More tellingly, the online market is subject to its own internal structural change. In very simple terms, multi-channel is growing significantly faster than online pure-play. The overall online ‘market’ grew +4.6% in 2025, with multi-channel (+5.6%) outpacing online pure-play (+3.6%) by some margin. As a result, the share of online spend tipped further into multi-channel’s favour (52.9% vs online pure-play’s 47.1%).

If that is the headline market dynamic, there are a number of moving parts below the surface that are underscoring this evolutionary structural change:

• Fall-out / failure of pure-play operators
• M&A activity
• Operators ‘crossing the divide’
• Stronger organic growth from multi-channel operators.

Retail channels of distribution are fluid and increasingly complementary. ‘Crossing the divide’ is essentially a two-way street: store-based operators can branch into online by launching a website and building this into their brand proposition.

Equally, online pure-players can open physical stores. But there have been infinitely more examples of the former than the latter. There has been considerable narrative around online pure-plays traversing the divide and opening physical stores, but to date relatively few examples of any scale.

Now we are at something of a positive inflection point. Most multi-channel operators are now at scale in terms of their online infrastructure and online capex requirements are less ‘lumpy’ than before.

The heavy-lifting has been done and this is freeing up capital for investment elsewhere in the business. Increasingly this investment is finding its way back into the store base, as much through store upgrades and refurbishments as through new sites.

Online isn’t dying, its evolving.

While the growth statistics are far less explosive than before, it is still a growth market – decelerating growth is not tantamount to negative growth. 

But the structure of the market is changing, newer operators are emerging to challenge the established players, multi-channel operators are more than able to compete in the space.

The over-arching takeaway is the old retail adage that consumers shop brands, not channels. They are more likely to be loyal to a brand they trust, be that multi-channel or pure-play. They will not shop a channel for channel’s sake. And most are actually channel agnostic.

Above all, the dividing lines between online and physical have now blurred to the point of being invisible. Think brands, not channels.