Geof Todd

The Internet versus the high street? Some thoughts on how they might work together.

London

The recent news stories about Marks & Spencer and JJB Sports indicate that both have experienced falling sales in the on-going downturn and in particular, have suffered from the continuing rain that seems to have dampened everyone’s spending plans. Of course, it’s not such a simple diagnosis as this, that it’s the weather at the heart of all their problems. Where once we were ‘cash rich and time poor’, we are now in the post-2008 ‘Age of Austerity‘ but we are also seeing the continuation of a massive shift in the way people shop, created by the Internet. That said, customers still managed to navigate the puddles to make it to both John Lewis and Debenhams stores but it’s the likes of Internet fashion retailer Asos that really bucked the trend with a first quarter rise in sales of 31% and who are showing the way forward for such forms of retailing.

Retail expert, Mary Portas has been invited by the Government to help breathe new life back into our high streets, but I have to admit that it’s a huge task and I wish her well. With the rise of edge of town supermarkets and massive shopping centres becoming ‘event’ destinations in their own right, it is difficult to see how the high street can respond, especially as they appear to be clones of each other with identikit branded stores offering much the same selection up and down the country. It meant that they were ripe for consolidation and relocating to the out of town sites and on to the Internet.

My small suggestion for the high street is that it needs the re-birth of the artisan-owned and specialist retailers, but this will usually mean that they are going to be relatively expensive and that is a problem in this ‘Age of Austerity’. I just hope that town centres are not going to be overtaken by fast food chains, phone shops, coffee bars, Charity shops and Betting establishments (whatever happened to the term ‘Turf Accountant’  by the way?), with the odd pub thrown in.  Good Luck Mary P; our ageing population may not be able to afford the petrol to go out of town and the Internet may not suit all of them either, but at least we can all complain over a good cup of coffee, even if we have nowhere to actually shop.

Dell proved that agile manufacturing, linked to close collaboration with their customers through the Internet, ensured the disintermediation of the middleman/wholesaler, though of course we know that their products have now reached high street outlets too. But these high street shops are now suffering from the scourge of ‘Show rooming’ – the practice of potential customers coming into the shop to experience the products in person, before picking up their smart phones to use the free Wi-Fi  connection to check out the cheapest alternative source for the same product via the Internet. The traditional manufacturer-wholesaler-retailer high street supply-chain model has not been viable for some time, unless what you can buy on the high street is different/better than what you can buy on-line. If it’s the same product, the Internet is almost certainly going to win that battle.

Like Dell, brands need to become destinations in their own right. What do I mean by this? Apple Computer is an example of this shift in that they have created a multi-faceted ‘clicks and mortar’ hybrid approach, where 2 routes feed the money directly back to them – on the Internet and through their own Apple Stores, with indirect sales coming through other selected retailers.  They may use logistics and fulfilment partners behind the scenes, but to all intents, customers enjoy the feel of buying directly from the manufacturer. It helps of course that Apple offers ‘insanely great products’ too.

It is relatively straight forward to set-up an e-store and shop front on the Internet and the clicks and mortar approach has already moved on to the next phase – cutting out the mortar. Actual products are now routinely bought through virtual shops that have no high street presence – Amazon & Asos for example. But even these guys are mass aggregators of other people’s products (by and large that is – they do offer ‘own brands’ in some areas too) and they actually benefit from the ‘Show Rooming’ experience. Here there is a common feature of both successful on-line and high street retailers; 3rd party brand and sub-brand choice. Whereas M&S have created a selection of sub-brands (Per Una etc), they don’t have the 3rd party premium brands alongside to offer further choice. This comes back to my point about the brand being the destination. John Lewis, Debenhams, Amazon and Asos all offer a range of premium and their own sub- brands and in the on-line world, this can mean a virtually unlimited selection, which is not bounded by traditional logistics and retail space constraints. This bodes well for the Internet, but it will mean that even successful high street retailers today will have to stay agile for the future, especially if their premium brand product suppliers decide that they will shift to a more direct sales model, like Apple and cut out the high street retailers.

My personal view is that the hybrid approach used by Apple offers a good balance for the future of specialist branded retailing, where you encourage show rooming through your own high street, possibly temporary pop-up stores and supply through these, the Internet and a few ‘selected’ retailers. This model works for high value CE brands like Apple, but it could also work for premium products like specialised sports goods, luxury products and designers too (witness Cath Kidston). And that’s where there is a connection between the Apple Store experience and my Added Value Retailer – this approach works for an identifiable and well understood brand with an informed staff who can add to the purchasing experience and so make a difference.  However, this is not necessarily a model that will suit all brands or all products; I’m not sure that I can see a dedicated P&G or Unilever product store just yet. That said, why not try a pop-up promo store to launch a new/specialised branded product that can in time only be bought through the Internet; it could even work for some types of repeat use personal care products. Who fancies a pop-up hair salon that offers a low cost wash, cut and blow dry to promote a new range of hair-care products? Shoppers would have to provide personal profile contact details to benefit from the offer. Here again the on-line guys have the edge. When buying a product in-store you can be anonymous, especially if you pay with cash. At best a credit card offers some personal details, but ideally every store wants you to be their store card or loyalty card holder so you can be closely followed-up. The starting point on-line is that you have to share your details to use the service and this level of engagement is invaluable as you build up your purchasing profile.  This profiling/targeting process is currently a very hot topic and marketers and advertisers are learning and adjusting along with the purchasers to the new dynamics of broadband connected PCs, tablets, TVs and smart phones. Channel agility is called for by the sellers to understand and engage with their prospects and relevance and choice is demanded in return by their customers.

The route to securing the next transaction is significantly more complex in the age of the Internet, especially with multiple new media devices, with the added complication of both lateral and vertical communications channels to engage with and through.  The high street also needs to adapt to become an ‘event’ destination too, to recapture our interest if it is to survive and prosper.

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