Can High Street Stores Win Against E-commerce?

Can High Street Stores Win Against E-commerce?

The future of the high street relies on retailers understanding their customers and, in particular, millennials and generation Z, the consumers of the present and future

By David Kiriakidis

Watch the news these days and you'd get a feeling of some sort of impending apocalyptic doom for the high street, where boarded-up windows and "closing down sale" signs are set against a backdrop of litter scurrying in the breeze, grey skies and row after row of pound shops, bookmakers and pawnbrokers. While the outlook isn't exactly rosy, high street businesses shouldn't start picking out coffin nails just yet.

The growth of online shopping over the past couple of decades has led many commentators to foretell the inevitable death of high-street retail, at least in the way that we have come to know it. In fact, with 35,000 retail jobs lost in the UK already in 2018, high-profile giants such as Toys "R" Us, Maplin and Poundworld having shut up shop, and others like Mothercare and CarpetRight finding themselves in company voluntary arrangements, on first impressions at least, this death knell is less of a prediction and more a statement of fact. 

Many factors have played a role in this decline - from the tightening of purse-strings, a result of years of post-recession austerity, to the rampant growth of online retail and e-commerce giants like Amazon and ASOS. The combination of these factors has resulted in CEOs up and down the country standing in front of a camera and pinning the blame for their failings directly on their cheaper online rivals.

But the reality is a little more complicated than just cost. Sure, online retailers don't have the expensive overheads that come with running a high street store, especially one with multiple locations. But they still have expensive and often-complicated supply chains, delivery costs and the vast battlefield that is online marketing. 

It also goes beyond blaming austerity and nervous consumer spending. In fact, with statistics showing consumer spending growing consistently since 2011, this line increasingly looks like a rather poor excuse.

It's easy to blame external factors like these, and that's why we've seen them used in a copy and paste-like fashion in recent months, as chain after chain goes out of business. But a huge part of the problem lies not in wider economic conditions, but in the reluctance of retailers to change with the times, and their inability to adapt to changing buying habits.

It's time to adapt

These changes in buying behaviour have come about as a direct result of innovation and disruption by online retailers. When e-commerce first came about, many dismissed it as a flash in the pan. Even as it started gaining traction, and people became more at ease with purchasing items online, many believed that the ability to touch, taste, smell and see a product first-hand before purchasing would limit the growth of e-commerce. Ultimately, seeing online retailers lose out to their traditional high-street counterparts, despite their ability to offer products at a lower cost. Not only have we seen that this isn't the case, we've seen a pattern amongst the big retailers that have gone out of business - a lack of focus on digital growth, and a lack of adaptation.

They've also come about as a result of changing customer demographics. Online is the natural environment for today's 20 to 30 year olds. They've grown up in an era of social networking and online content, and use email or instant messaging as one of their main methods of communication. The internet is a second home to many of this generation, and now that they have spending power and disposable income, it's only natural that they would look to the internet to spend it. Online retailers have been quick to embrace this, investing in websites and digital assets to make the customer experience as easy as possible. It's no coincidence that many of the high street retailers doing well at the moment, including the likes of John Lewis, Lush, and Currys PC World, have all built strong online presences, integrated the online buying experience with the physical experience using "Click and Collect" and in-store returns, and market effectively to younger generations. 

So how can high street retailers begin to fight back against the surging popularity of e-commerce and m-commerce?

Think small

For years now, online purchases of products like electronics, books and household goods have been strong, as these are all products where the customer can be reasonably assured of what they’re getting. Customers can very easily go to a high street store to see the product first-hand before buying it online, which inevitably removes one of the pain points of online buying. As Simon Thomas of Moorfields Advisory, the administrator appointed to oversee the final days of Toys "R" Us, candidly explained in his post-mortem of the company;

We have the online problem. People can go into our shop, look at something, then look at an [online] alternative and buy it at a cheaper price.

And this behaviour isn't limited to one sector. We've seen department stores lose business to the likes of ASOS, Missguided and Matchesfashion. We've seen Amazon almost single-handedly push WHSmith into a precarious position. Even DIY and home furnishing stores like Homebase have been hugely affected by the growth of online brands like Made.com and Wayfair.

But with products such as clothes and cosmetics, items which you'd expect to remain a key strength of the high street, online retailers have made huge strides toward removing the purchasing pain points. Online clothing stores have gone to great effort to make their returns process as easy as possible, and their delivery process quick and transparent. In fact, it's no great surprise to see that Amazon Prime, the retailer's offering that offers one day delivery on many items, recently surpassed through the 100 million subscriber mark

Even in the cosmetics and grooming industry, there has been extensive innovation from online brands. Harry's, the men's grooming company that offers a subscription-based razor delivery service tailored to each customers' unique needs, has seen huge growth since expanding to the UK from its US roots. 

What has set these businesses apart from their bricks-and-mortar competitors is their ability to adapt, develop, and grow. With an Agile mindset, they've developed features and products around the needs and feedback of their customers, and released them quickly. They've utilised the nature of e-commerce to build reward programmes and referral incentives for their customers. They've focused on creating a story around their brand, and turned the simple process of a customer receiving their order into an unboxing experience.

These efforts all boil down to one thing - the ability to adapt, and adapt quickly. Small businesses have an inherent advantage over big businesses, in that they can capitalise on opportunities and identify threats at speed. This ability will become crucial for high street retailers if they are to succeed as online retail grows even bigger.

Think different

With so much more choice for customers now, another vital factor is who can give their customers the best experience. With greater choice comes increased customer awareness of alternatives to your product, and while price is obviously a pretty major factor, it's now not the be-all and end-all. It's a well-established fact that one of the most lucrative customer demographics is 20 to 30 year olds. They have the all-important disposable income that businesses are looking get a slice of. Many don't have the spending commitments that come with having children. In fact, the current crop of 20 to 30 year olds have completely different money priorities - with the rising cost of house prices outstripping pay increases, many millennials are giving up on owning a home, and not being tied down to the ball-and-chain of saving for a mortgage deposit gives them more spare money.

With this greater spending power, you'd think high street retailers would be tripping over themselves to cater for this demographic. But looking at the major chains that have disappeared from the high street, there are more than a few that have clearly failed to understand this demographic. Online retailers aren't just appealing to them as a customer; they're appealing to work for, and having millennials in your team is a pretty good way to understand them. And it's vital you do, as this demographic is now made up of digital natives, those who barely remember the internet not existing. 

In the not-so-distant future, this demographic will be made of Generation Z (those born between the mid 1990's and mid 2000's). They've grown up with Snapchat and Instagram, don't even know what a dial-up tone sounds like and think tape cassettes are some sort of strange ancient artefact. They are even more digitally native than millennials, and if high street retailers are to ensure that they can compete with their online counterparts long-term, they need to begin to understand this generation.