With the recent demise of Jessops and HMV, there has been a lot of talk of how the internet is killing the high street and how terrible it is that we’re going to be left with ghost towns. It would be difficult to argue that the high street isn’t changing but I think ‘dying’ is over dramatising it and blaming the internet is missing half the story.
The internet is a very versatile place to do business and it has created businesses that could never have sprung up except in the biggest cities around the world. Whatever your hobby, whatever niche you are interested in, there is a site you can buy the supplies you need and maybe even chat with people with similar tastes. But, even in the short period that the internet has been around it has changed a lot and this has almost mirrored what has happened in the high street.
Offline shopping habits have changed from a similar situation of small niche shops to big out of town hyper stores that sell everything you could ever need. Most local butchers and bakers disappeared decades ago as this business transferred to the supermarkets. Once they had secured this market they moved on to magazines, CDs, movies, greetings cards, electronics goods, clothes – do we see a pattern here that reflects the high street chains that have closed in the last few years?
So, where does the internet fit in and what trends have been happening there? Well the internet has clearly added to the pressure on the high street. Price transparency has been the real killer here! High street shops were able to make good profit margins on products because it was neigh on impossible to compare prices with their rivals. This created a perfect storm that flipped profitability from traditional shops to websites; shops had overheads and an audience limited by their location, websites could have low rent warehouses in the middle of nowhere and the whole world as their potential customers. For many companies, however, it didn’t have to be this way, they could have joined in the party much earlier, established themselves on the internet and made the switch to 21st century trading.
Here’s some examples of where it went wrong and some companies who did it right.
HMV – Were late to start trading online (compared to other sites anyway), did not have price policy where online and offline were joined up, did nothing to take advantage of their stores to take on and beat Amazon.
Jessops – Did not use their position as experts to answer the questions of people on the internet. This comes at a time when photography and DSLR cameras are more popular as ever and complete novices are buying expensive bits of kit. These people could have been better served by shops they could have kept going back to answer questions of + a great website that would have helped them become a better photographer + the option of classes/lessons in stores. There are offers on daily deals sites for photography classes every other week – the demand was there!
Comet – I suspect that Comet could have made a successful transition to internet trading if they hadn’t been lumbered with so many stores around the country that still had long leases left to run. They had a pretty decent site, not the best but OK. In their case it looks like the business model as a whole that failed, rather than their internet plans not being good enough. They came under pressure from lower cost rivals and they concentrated too long on the low profit margin products while missing out on the race to sell high end, high tech goods.
Who did it right?
Schuh – Taking what they did well on the high street and doing it even better on the internet. A very focused buying department, shops that are constantly renovated to appeal to their target market, staff that are 100% focused on customer service and priced at the right way to make sales and make profits. Although the Schuh stores and website might not always be the cheapest place to buy a pair of Converse, customers know that they will get fast delivery, easy returns and the latest styles – not things you can guarantee if you buy from Amazon!
Scan – OK, they aren’t a high street store (they have one store) but they have been around since 1987 and have transitioned their business to trade online and compete in a marketplace that is dominated by Amazon and customers looking to buy at the very lowest price. How did they compete then? They became experts in their field,they show people they are always ahead of the tech curve, they have best customer service in their market and they use the supermarket technique of selling ‘loss leaders’ to get people through the door.
This, however, is not the end of the story as the internet is evolving much faster than the story of the high street. Amazon is the Tesco of the online world and is gobbling up the markets that lots of smaller websites used to turn a profit on.
We’ll follow on from this story soon and talk about how retailing is changing online…