Troubling times for retailers

May 31st, 2005

Are we in a cycle? Are we facing something more fundamentally structural? As retailers continue to struggle.
The FT on Thursday 26 May reported that WH Smith, MFI, Dixons and Kingfisher had all suffered on the high street and their share price reflected that struggle.
Boots are another high street retailer that has faced mounting difficulties.
The Observer reported that

M&S shareholders are braced for poor trading news this week when chief executive Stuart Rose is set to confirm that sales are falling and profits for the past year are in the region of ?610 million – down from ?805m a year ago

Whilst online shopping increased last month by 30% according to the Interactive Media in Retail Group (IMRG).
Computing World posted

The increase is the biggest in the last seven months, tripling from 13.4 per cent in February to 29.3 per cent in April 2005.
The same research shows that, although overall sales across all retail channels were fairly flat – down 0.1 per cent compared to April 2004 rates – online growth came at the expense of the high street, which fell 4.2 per cent and was down from a slight 2.9 per cent rise this February.

Computing world however has some interesting analysis, that, faced with decreasing sales on the high street, retailers still see an online/mobile digital strategy too risky. Quoting Nick Gladding, senior analyst at retail researcher Verdict

'A retailer facing intense competition on the high street in unlikely to invest online,' he said. 'They still see it as too risky.'
There is also a fear that investing more in an online presence will only cannibalise existing high-street sales at the expense of overall sales growth, Andrew McCelland, IMRG development director told Computing.
'But there's more risk losing sales to the competition who do have e-retail strategies,' added McClelland. 'This is particularly the case when you realise it is time-poor, cash-rich consumers that are more like to shop online.

I find it fascinating that companies have not got to grips with our digital universe. An AOL report of 2003 showed that people do in fact change their behaviour when they can shop online. From doing it in your pyjamas to simply wishing to avoid the heaving crowds.
For heavens sake – what would you want to do? Get in your car, fight your way to whichever high street retailer it is – that all look the same – bland – to get poor service, the item is not in stock – have an adversarial experience – whilst the kids are screaming etc., Or do you go online have a quick shop – purchase an item or two and then go and; play golf, watch the football, go to your dance class, do the gardening, spend an extra hour in bed, play with the kids in the park.
As someone once said I hate shopping but I love to shop on ebay. Now why is that? Ultimately, I am not saying that there will be no high street left, but perhaps our notions of how we spend our time are changing – slowly. And this affects traditional retailing concepts Gary Hamel writes

Thousands of look-alike products are launched each year, distinguished only by their advertising. From the 1950's to the 1990's, consumer marketing was innovations high ground. The best and brightest no longer wanted to be scientists, they wanted to be brand managers. The new industrial order is the product of a very different type of innovation?one built on neither the slow accretion of scientific knowledge nor the breathless hype of Madison avenue, but instead on leaps of human imagination.
The goal is no longer a patent or a new ad campaign, but a radical concepts, and ideas.

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