Unless you have adopted a reclusive lifestyle of late, it should be clear from the endless news reports and closures, that the High Street is not coping well with the Economies’ woes.
Week after week, we are told of companies that have gone bankrupt, let staff go, or simply ceased trading due to a lack of sales. The underlying reasons for this are clear, in an economy stuck in recession, shoppers are becoming more discerning and ultimately more shrewd in their buying decisions.
Simply put, if they can get it cheaper somewhere else, they will. Brand loyalty has next to disappeared. So if they are going somewhere else, where are they going?
They are going to the Internet.
image credits: @Nigel Chadwick
Shopping has greatly evolved over the years. Arguably, trading and bartering has existed as long as we have been a sentient race on Planet Earth, but shopping in its current form, especially in the UK, can be traced back to an American named Harry Gordon Selfridge, and the opening of his self-named shop in a then quiet area of London, known as Oxford Street.
Selfridges, which opened in 1906, was the first truly “modern” department store, with vast open areas for the customers to browse, goods that could be handled and tested, and areas for reflection such as the Quiet Room, installed with state of the art, “Double Glazing” shortly after its invention in the 1930s.
This in itself was a radical departure from the more conservative and uptight attitudes that London and the UK had previously adhered to. The traditional role of the shopkeeper was to stand behind a counter and fetch goods as the customer asked for them. For the customers themselves to have free reign of the shop floor presented a quandary for the traditional values that most sellers held dear. They had been previously there to sell to the customers, and now with Selfridge’s new store, the staff were merely there as customer assistants, to aid the shoppers as was needed in the shopping experience. In Mr Selfridge’s own words, “The customer is always right”.
Bring that forward to the modern day however and the situation has changed. The shopkeeper has been replaced by the online shopping basket and the only reason that Selfridges remains an exception is in the fact that it remains open, whilst similar stores around it are closing with reckless abandon.
image credits: @Jeff Sandquist
It is clear from the statistics that the High Street is under threat. At least 30 major brands, including Woolworths, Jessop’s and Blockbuster, have either gone into administration or disappeared from the high street altogether since 2008, and the signs of the recession ending, and halting this spate of closures is unlikely. Instead online giants, such as Amazon, The Hut and Play.com have taken huge chunks of the market away from the town centres and made it their own. In a time where roughly 7 in 10 Internet users now shop online, the High Street can offer no competition for these intangible retailers.
The issues the high street sellers have to contend with are myriad. High rental prices in prime inner city locations, staff wages, exclusivity rights on new releases and geographical limitations all pose economical problems for the retailers, which have to be reflected in the prices they charge for goods. For global online companies like Amazon, the complications are less binding. Their website takes most of the labour out of shopping for the company and the customer and cheap warehouses in out of town locations deal with the packaging and delivery of the goods. Amazon, which opened in 1994 as an online book store, operates websites for 10 countries, delivering to many more, and is eating up competing companies at a rate of knots.
The shift is noticeable. Waterstones, still operating at the time of this post has been forced to drastically change its market strategy after Amazon and other e-retailers introduced E-Books. Viewable through devices such as the Kindle or Nook, the E-Book is a totally digital, faithfully reproduced copy of a book, at a fraction of the price. Without binding and printing costs to affect the pricing, Amazon can sell as many copies of the books as they like without having to recourse to re-prints, or restocking.
For Waterstones this means that their tangible goods need to be even more appealing, as eventually only those seriously opposed to making the move to digital will remain as their customers. Hardback and paperback sales are under threat for more than just this reason however, Amazon is now able to pass its saving through E-Books to its printed volumes, undercutting high street prices a second time.
For the average consumer this means a trip into town is more likely to be a browsing occasion where goods are evaluated and not bought, before being purchased online at a lower price.
image credits: @LaserGuided
For the main retailers the answer is not simple, but there may be light at the end of the tunnel. Retailers such as John Lewis have launched their own websites, offering a comparable range to their stores, with the added benefit of home delivery and slightly improved prices. This strategy does seem limited however, in that only stores, with their own exclusive ranges, can take advantage on online space. Stores such as HMV and Zavvi, the latter of which closed 2 years ago, still will face stiff competition for more established e-retailers, who can offer the same stock.
The gambit has paid of it seems however, with John Lewis reporting a 40% increase in online sales year on year, which will pay them dividends in the future.
For the more generalist retailers, for whom online competition is too fierce, other strategies must be considered. Game for instance, is offering its customers the opportunity to play soon to be released games before anyone else, instore, in “Lock In” events. These events, widely publicised on the social media networks, have proved popular with vastly growing market of gaming consumers, and has been repeated for high profile releases such as Gears of War: Judgement, Dead Space 3 and the most recent Nintendo console, Wii-U.
It has provided gamers with something which they cannot get online, and as such has added value to the brand. This coupled with loyalty card deals and a strong high street presence, has helped stave off initial worries of the company going under, and increased footfall, which is vital in this day and age.
Exclusivity of experiences is the key. By offering something the no consumer can get online, the shops have more of a chance of increase both brand awareness and sales within the stores. If a customer can compare prices they will, so bricks and mortar stores need to remove the internet from the equation and deal strictly in unique products and opportunities.
image credits: @Stephen McKay
This is a tricky one to predict, with so many stores rapidly changing, altering their selling focus and being bought out by other companies. There are however, three main contenders for the rather dubious crown:
With a history on the high street that dwarfs many other retailers, Argos’ business set up harks back to the pre-Selfridge’s era of shop keeping. The now well known process, of looking through a catalogue, filling in a slip of paper, and waiting at an assigned counter for your products has now become associated with the rather old fashioned and quaint ideas shops had before the Internet came along. Although Argos reported a 2.7% sales increase in 2012, it has still resulted in falling margins as the retailer struggles to keep up with competitors online.
The child and baby store has reported a 7.4% fall in total group sales over the last 12 months, which includes both the Early Learning Centre and rival Blooming Marvellous, which it bought out in 2009. Recently Mothercare has integrated the ELC into its own stores in an effort to cut down on rental and stocking costs and has announced major restructuring plans in an effort to stave off closure. Some stores, in the 38 countries in which it operates, will consider themselves lucky if they see this year though.
Remaining on the high street since Henry Walton Smith first opened his News Vendor shop in 1792, WH Smith has struggled to maintain its relevancy in an age of digital consumerism. The brand has faltered in the 2000s, initially losing out to supermarket chains such as Tesco’s and Morrisons, who were able to undercut their book prices, and is now suffering as online retailers take their book, magazine and newspaper revenue through digital channels. The brand even went so far as to allow QualitySolicitors to set up stalls within the shops in the hope that this would yield further trade. More recently, developments have found the retailer focusing on gift giving and Christmas promotions in their advertising, trying to score hits within festive market, and the inherent difficulty of giving an e-book as a present.
image credits: @fotopedia
It remains to be seen what will become of the high street in coming years. The most recent festive period in 2012 saw online sales increase by 20% with a further 17% rise on Boxing Day 2012, compared to the previous year. To combat this, bricks and mortar retail outlets are bringing their Boxing Day Sales forward to start in to mid December, forcing down prices across the board, but ensuring that some of the Christmas money they so dearly depend on is pushed their way.
Retailers such as John Lewis are leading the way in terms of innovation online and their year on year increase has shown that it is possible for a store to cohabit the virtual and real retail sectors with a degree of success.
In the long term, the question that must be asked is what stores can we simply not do without on the high street, and as recent closures and sales patterns have shown, that might not be that many at all.