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High Street vs. High Speed

January is, invariably, a testing time for retailers, as results from the end-of-year holiday shopping period are published and decisions are made on the coming year. For a number of retailers here in the UK, the festive season has not delivered sales figures sufficient to save them from the clutches of administration.  In recent weeks, three well-known UK high street brands announced they are to cease trading in the music, cameras/electronics and DVD rental/ sales categories respectively.

A number of commentators have pointed to the intense competition felt by these companies from high-profile internet retailers, but are these competitors at fault?  It’s easy to blame the new kids on the block for the demise of older brand names, or even to blame consumers themselves for betraying the high street by purchasing goods online, but does this mean that the retailers are innocent parties in this?  Let’s look at the evidence.

All of these brands were established, well recognized vendors in their field.  In this respect, they had the upper hand in terms of visibility and recognition. They also had ample opportunity to take advantage of the online environment, especially since their particular goods were among the first to make that leap.

Roper Reports Worldwide asked consumers why they preferred online or in-store purchase channels. While consumers enjoy the in-store experience for the ability to inspect the merchandise and consult expert sales staff, the range of products and 24/7 access to shopping are the most commonly cited reasons for favoring online stores.

Taking the consumer electronics market as an example, globally, 64% of consumers prefer to make purchases in this category from a physical store. But in the UK, just over one-third (37%) say this is their preferred source.  About one-third (31%) prefer to buy online, and the remainder state no preference.  In the music and DVD/video arenas, we find Britons’ preference is heavily skewed toward online.  So, in the UK at least, much of the trade has already migrated to digital commerce.

However, the casualties of this latest round of retail closures did have online sales sites in place.  Migration from one platform to another should have resulted in a transitory retail model, supporting sales for the ailing channel, along with the opportunity to respond by updating their focus to suit market conditions.  In theory, these brands had the best of both worlds – they could offer the in-store experience and security to those who were unsure of buying online, along with the breadth of products and ability to compete on the prices offered by online businesses.

In reality, these brands did not feel the dual benefits of this combined approach.  They were unable to update their physical retail concepts to capture the interest of those who shop in-store and could not create sufficiently competitive online channels.  Instead of capitalizing on the benefits of these two formats, they were encumbered with the costs of bricks and mortar, but without the online presence of key competitors to support this.  It is not the consumer who is to blame, nor the online competition, but arguably the inability of traditional businesses to change quickly enough to meet the requirements of the 21st century multichannel retail world.

The topic of “Bricks and Mortar vs. Online” is discussed in more detail in the recent GfK Consumer Trends Need to Know Report on Retail.  Contact GfK Consumer Trends here to find out more.

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