The Death Throes of the ‘High Street’? – Part 1

I have never been inclined to be the harbinger of doom. However, from where I’m standing, the facts, and what they might mean for the future of ‘High Street’ shopping, seem irrefutable.

We are already seeing businesses in ‘High Streets’ up and down the country suffer. More and more are closing. This might partly be attributed to the recession; and of course there has been a decline over a number of years that could be due to other means. The increase in out-of-town shopping centres certainly has not helped, the retail giants massed together with enormous car parks, fast food outlets, cinemas and more. But now a new threat has emerged: much larger and more virulent than ever before. The traditional customers are now staying at home and doing their shopping on the internet.

Month by month we see a continued increase in the number of people buying online. These people used to shop in the ‘High Street’ of the villages, towns and cities all over the UK. If you’ve watched the news on TV or in other media at all over the last few months, you can’t fail to be aware of the problems local (and often national) retail traders are experiencing.

Online however, it is quite a different story. In July 2010, online retail sales in the UK reached £5 billion. This is approximately 20% of UK retail sales, and represents an increase of 18% compared with the same month in the previous year, with sales volumes up by 1.1% on June 2010.

Online sales are increasing year-on-year at an exponential rate. Back in 2001, the average (mean) spend was just under £150 million per month (total online sales for the year 2001 were £1.8 billion), and there are no signs of this growth rate slowing.

To put this into perspective, the top three shopping streets in the UK (in terms of sales volumes): London’s Bond Street, Oxford Street and Regent Street, together, took just over £5 billion in sales for the whole of the year 2009. This is by no means a small sum, but the whole of the annual income is comparable to just one month of sales for the shops along the ‘online high street’!

Interestingly, almost all non-food sectors are reported as showing strong growth online, with the biggest increase of 68% being seen in clothing and accessories. This is certainly not the same kind of performance that is being seen elsewhere.

What’s more, the online shops are open 24/7 and accessible from every home, office or even café that has an internet connection, Wi-Fi hotspots have sprung up everywhere and many people are now shopping (and comparing prices on the spot) from their smartphones.

A series of reports from research company IMRG/CapGemini adds some weight to this. IMRG/CapGemini predicts that if current trends continue, within 10 years 50% of the UK’s retail sales will be carried out on the internet.

Of course, a prediction is only that, a prediction, but even the most sceptical can not ignore the enormous increase in online sales, and actual performance has surpassed all predictions made in recent times.

While this is likely to have a devastating affect on those who have their livelihoods in the high street, the broader impact is potentially far bigger.

I wonder if councils – not known for being fast moving when it comes to policy – are ready and equipped to rethink their development strategies and seek innovative ways of attracting people to town and city centres. Or to find ways of their communities engaging with the local area through the internet (beyond finding out when the next refuse collection is from a bloated, confusing website).

Governments might also experience falling tax revenues, where companies that are set up to trade and sell online only, can base their headquarters in offshore locations more easily that traditional ‘bricks and mortar’ companies thus benefiting from lower taxes as well as labour costs.

Speaking of Governments, most major countries are pushing for the roll out of faster broadband and service providers are also developing faster and better ways of providing internet access. In South Korea, and perhaps more surprisingly Latvia, broadband download speeds are in excess of 20Mbps, with 10Mbps broadband being considered slow. Yet in the UK we can’t even get it together for 50% of the population to have 2Mbps download speed, with many in rural UK areas restricted by no-go zones or not-spots. Finland has declared broadband to be legal right for every citizen (from July 2010)! So when will the UK catch up with this, if we are to compete in a global marketplace, we at least need to be competing on a level playing field. This is even more important post-recession.

The larger national chains are already preparing for this transition of customers’ activity, with Tesco being current leaders in the race to gain market share with online grocery, home products and everything else they can manage to provide while providing home delivery for the weekly shop.

Young, fast-moving and well-funded start-up businesses are looking at the marketplace and seeing that there is a raft of opportunities to be had online as internet usage becomes mainstream – not just for the geeks or the young - and continues to permeate the population.

The future is exciting for those who are determined to take part, be engaged and make the investment. However, those who are determined to stick their heads in the sand, or make smug remarks about not really being ‘into’ technology, or even worse all those people out there who say: “Oh yes, our website is under construction,” or more often: “… redevelopment at the moment.” But when we look at the sites, there is so often evidence that they have been ‘under-construction’ or ‘redevelopment’ for years (or even in some cases – a decade). I can only assume they are hoping ‘it’ (the internet) will stop soon or maybe they think it just won’t ‘catch-on’, as someone said to me back in the 90s. What are they waiting for and what are they going to do when they can no longer rely on the dwindling numbers who take the journey through a high street that has only a few shops in it?

The reality is, in a mere 15 years, the internet has become the most dominant feature of daily life, creating unimagined opportunity for many and changing the very fabric of our society. We have no way of really telling what effect it will have in the next 5 or 15 years, or whom it will affect the most.

In part 2 we will be discussing how the high street has been under attack since the 1980s and how business owners need to act to stay afloat.

Business survival and the Internet !

As long ago as the 1990's there have been predictions on the way the internet is going. The change that we have seen to date is nothing to what is coming in the next few years and the future. It is not always safe to predict the future but if you consider the way the internet has influenced our lives to date it is not difficult to predict the changes that will come. Changes that affect everything we do and the way we live.

I am not referring to the movement towards social media and the latest trends in business promotion but the way the internet is influencing how people live, interact and pursue their daily activities. The changes the internet has brought that influence and affects the way we all interact socially and in business. Like the printing press and education that changed society in the past, the journey will be difficult, some will resist, many will gain and many will lose.

The effect the internet has had to date is small, only taken up by those who see the possibilities. Only a small minority who are engaged are actually influencing the creation of trends that are seen as the greatest thing or the next killer application.

The vast majority of internet users are joining unaware of the consequences and not sure of the possibilities but want to be part of it, the ‘me too people’.

A sales medium or something else?

Business owners see the internet as another sales medium, individuals see it as many things: A place to meet, a place to share, a place to learn, a place to make purchases. These are all the positive facets, we also have to think of the ‘dark side’ a place to corrupt, a place to mislead, a place to steal, a place to groom.

I have been researching the effects the internet has had on the retail industry in the last 10 years and the results are quite scary for those who occupy the High Street. At speaking events - across the UK and in Europe - I have been sharing with audiences about the changes that have taken place and are yet to come. It has frightened many but the evidence is irrefutable.

Too many of the old schools, in Business, the Press and Politics do not comprehend the enormity the internet will have in everything we do. Business, society and life will never be the same again.

The vast majority of business owners are reacting to the technology created by the web developers and trends internet users create by their volume and curiosity. These businesses are jumping on the band wagon hoping they won’t get left behind. The movers and shakers are the likes of Amazon and eBay - and don’t get it right every time – They are the ones who thought it through from the beginning and are now reaping the rewards.

Online Retail

The retail industry has a lot of catching up to do. They are still applying old business models to the internet. It is not the High Street it is the Internet, it is new and in most cases it is the blind leading the blind. Business owners are reliant on web designers and developers to find the solution to their needs but these are not business people or marketers. They simply take the clients money and build a website from a template and then put the clients content into it. No consideration has been made for the people who will be using the website.

The News

The press are also applying old business models to the delivery and monetisation of the news using the internet and they are failing rapidly. There was an interesting commentary by a journalist who was deriding bloggers on the BBC last evening. He has not realised that the mainstream press have lost out to a fast moving agile sub culture that is gaining momentum from the need of the user for faster and more responsive news. Not from across the world but from local events and issues. Watch out as twitter takes over from the press for local news and postings form amateur journalists on every street corner armed with a mobile phone, a blog and a twitter feed.

Social media

Society has already changed beyond recognition and we will see more of this in the next few years. Some governments have already tried to stop the march of the internet by blocking and filtering information. However, like the hacker each time you put in a firewall the hacker sees it as a challenge to get around.

The vast majority of social media users are blissfully unaware of the consequences of their actions, they are feeding the speed of change by joining. On social networks you can see everything you would expect in a soap opera. I have seen the early development of a love story to an acrimonious divorce. There has been the offer of a job to the public sacking of an employee because they connected to their new boss when they started in the job and then published a diatribe of how bad it was working in the company. This is not fiction it is the real thing, happening in real time and far more relative than the six week soap story. Does this mean the end of the soap opera as we know it?

The future

We are at the beginning of the story, I cannot predict with any accuracy of what technology or trend will spring out of the next great website. One thing I can be sure it will happen because the technology, the will, and the momentum are there.

The internet is a self service environment and whatever way you want to use it you have to take this into consideration. The question that business owners should be asking themselves is: What do users want? Can we provide it in an easy and timely way that meets their needs and wants?

Who will survive?

It is not really about the strong surviving but about the ones who can see, those people who have the broad knowledge from many sectors and are open to the challenges that the internet brings. They are not the young but the wise, the ‘T’ shaped people with a wide knowledge base which is focused on a core area, the internet.

Kind regards

Nigel T Packer