Online shopping, the high street’s friend?
The world of retail is subject to constant change; it always has been and always will be. No one is too big to fail. But also, a lot remains the same. For decades we have been talking about ‘the death of the high street’ and still are now. Is it a very long protracted death or are we waiting for something to happen that is not going to happen?
Of course, it is a tough world in retail and only getting tougher. However, despite what the press might lead us to believe, consumer spending has a solid growth, contrary to all supposed economic logic. What is reported in the press has huge impact on public belief, which is desperately unhelpful.
Online is growing at a much faster rate than standard or high street retail, which is not surprising. Online shopping accounted for 16.4% of all retail shopping last year, almost double the average anywhere else in Europe and this is one of the highest proportions globally. It isn’t solely the Millennial generation behind the surge in online, as is often assumed. The skew between teenagers and pensioners is almost completely inconsequential; Baby Boomers are just as likely to shop online as Millennials are. This is just one of the many assumptions made about the decline in high street retail, the difficulty is that it is impossible to quantify the causes and a lot of speculation has to be used.
One of the biggest difficulties with determining the impact online shopping has is trying to figure out what actually counts as ‘online’. The obvious ones are ordering online and the goods are delivered to you or ordering online and collecting in store. However, it is not so common knowledge that if you go into a physical store, say a shoe shop, and they did not have the size shoes you desired and so you order, in store, for the right size to be delivered to your home, then this would be classed as an online sale despite the fact it was in-store and you did not make an order online. Because of this, it does make it far more difficult to accurately measure the impact of online. Indeed, if that physical store was not there, it is not necessarily true that the customer would have just gone online to order their shoes.
This brings us on to the point that closing physical stores would of course eradicate a large proportion of overheads, but all the custom found in that physical store is not then equally converted into online sales. 8% of the 16.4% of online sales come from pure online retailers, such as ASOS and BooHoo but the rest are multi-channel. The top 12 U.K. retailers, including the likes of Next, M&S, Asda and John Lewis, are all multi-channel and not new faceless online-only operators. John Lewis have openly stated that their online sales are actually much higher in areas where they have a store than areas where they do not; they recognise the symbiotic relationship between the two and know that closing stores is not always the answer.
Mothercare found this to their cost. They transitioned to become more of an online business so store-space declined by 6%, closing c.90,000 sq. ft. of space. Sales went down by 11% as you would expect from downsizing but the key thing was that their online sales went down as well. Close too many stores or close the wrong stores, then it could actually be fatal to a business, contrary to what is often reported. Closing stores will slash costs, but in terms of longevity for a business, it cannot be expected that online will just pick up the slack. It is hard to draw a line between online and physical retailers and it is likely that the future will be a mixture of the two.
If a store cannot determine how much their physical stores are contributing to their online business, then they do not know where their store sits and do not understand the metrics or finances of the store in the modern-day retailing world. Online is driving change but it is not singularly responsible. The toxic mix of long-term structuring issues, exacerbated by recent headlines has been, and is, a fatal combination for retailers.
