Following the recent news that British firms Blockbuster, HMV, and Jessops have all gone into administration within the space of 7 days, it may seem as if the death knell may be about to ring for your local high street.
This news is even more shocking given that HMV was valued at around £1bn eleven years ago, and was also the subject of a Commons investigation for their irregular profits. This should serve as a warning to all business owners that even in a dominant market position; your business isn’t immune to the terminal effects of a dynamic business environment.
Combined with the fact that the BRC recently reported that retail sales would have fallen in 2012 if it hadn’t been for the strong growth in online shopping, the fate of the high street may already be sealed.
The rapid decline in high street shopping can be seen in the list of casualties that have all gone into recession in the past 12 months – HMV, Jessops, Comet, JJB Sports, Clinton Cards, Aquascutum, GAME, Peacocks, Blacks Leisure, Barratts, La Senza, Jane Norman, Habitat, Carpetright, Focus DIY, TJ Hughes and many more – all of these are large chains that have been hit hard by the consumer downturn.
In recent years, there has been a gradual shift in shopping habits over to online retail; this means that many retailers are making huge efforts to make their websites much more accessible and easier to use across all platforms. However, the decision to move your business completely online is one that should not be taken lightly; there are many advantages and pitfalls to both having a business that is online only, and having a business that embraces online and offline platforms symbiotically.
Online & High Street
Some businesses are reaping the rewards of successfully integrating their online and off-line channels; over the Christmas period, John Lewis reported a 13% increase in sales; Next’s sales also increased by 3.9%, which was bolstered by an increase of 11.2% in their online business.
The main reason that businesses such as these have managed to withstand the effects of the economic downturn is because they have realised that online and offline stores shouldn’t compete with each other; online and offline stores should be synergistic. By doing this, the business becomes aligned with the way that consumer habits have evolved.
In today’s business environment, the transition between web browsing and in-store shopping should be seamless. This can be seen in the surge in ‘click & collect’ services, which allows customers to order and pay for a product online and then collect it in-store the following day.
However, unless your business is already well established, it may be difficult to get your business on to the high street; the aforementioned BRC report also indicated that the narrow gap between total sales and like-for-like sales was a strong indicator of the incredibly small number of new stores that opened in 2012. Another big risk in owning a physical store is the astronomical costs that are normally associated with running them; this includes rent, heating/lighting, refurbishment, maintenance, distribution, merchandising, signage and staffing.
There are a myriad of businesses that have thrived in an online only environment; for any business, establishing an online presence can be a much more promising opportunity than attempting to juggle online and offline platforms.
Some of the true success stories in the online sector are Amazon and Viking Direct. Amazon originally started off as an e-commerce website that only sold books. However, as Amazon has continued to grow, the internet has allowed Amazon to have an almost limitless inventory; this has seen them successfully diversify into games, music, furniture, electronics, clothing and much more.
Amazon capitalised on the fact that customers appreciate selection; they made it their aim to provide a peerless selection of products, which was made infinitely more efficient by the use of a digital search facility. This made it incredibly simple for customers to find the products they wanted and wouldn’t have been possible in a physical store.
In a similar vein, Viking Direct originally started off as a mail order company selling office supplies and stationery; but they were highly astute to the changes in the external business environment; something which the recent business administration casualties failed to do.
For example, despite the rapid rise in online movie streaming services such as Lovefilm and Netflix, Blockbuster failed to notice the change in consumer habits (commonly referred to as corporate myopia) and continued with their dated business model.
Viking Direct however, realised that there was a seismic shift towards e-commerce and began to recreate their highly successful mail order business model in an online environment; this has made their comprehensive range of office supply products even more accessible to customers, which has seen them go from strength to strength.
However, one potential pitfall in having an online only store is branding. Establishing a strong brand online is incredibly difficult, and there have been only a handful of e-commerce sites that have succeeded aside from Amazon and Viking Direct. One company that has succeeding in building a strong online brand is fashion retailer ASOS, who have recently reported that their retail sales in December rose by 41 per cent.
The two key aspects of establishing a strong brand for your e-commerce website are exceptional customer service and selection. As we have already noted, Amazon, ASOS, and Viking Direct have all built a reputation for providing the largest selection of products available, but their customer service is also second-to-none; this helps to build trust, which is hard earned and easily lost.
This also helps to gain word-of-mouth recommendations from satisfied customers, which is an extremely powerful tool in the world of e-commerce. It is widely accepted that if you’re customers are dissatisfied with your online service, they have the ability to tell thousands of their friends online; this is incredibly poignant given the rise of social media.
To summarise, if you are trying to successfully run an online and offline business, you should focus your efforts on making the two platforms run symbiotically in order to make the transition between online and offline as seamless as possible for customers. If you are an online only retailer, focus on building the value of your brand by providing exceptional customer service and choice; this will help to gain customer loyalty, trust, and word-of-mouth marketing, which can be the difference between growth and decline.