Going, going gone...
High Street shops are going, is the end of bricks and mortar retail?
We have recently seen BHS, House of Fraser and Toys R Us essentially go bust, Debenhams limps on ( I predicted it would be affected some time ago), the question is, is there any future in High Street retail outlets other than existing in the form of Coffee shops and Charity shops?
20 years ago I worked for a small but highly important supplier of food products to the major suppliers like Heinz and the leading supermarkets such as Marks and Spencer. This supplier had been bought and amalgamated with another supplier by an investment group to sell on.
A major manufacturing company bought the supplier I worked for and my thoughts were it was going to asset strip it for the brand labels and substitute the products with lower quality ones. I was proven right. Some key staff were retained due to their business relationships with the customer base, but the majority of staff were disposed of through redundancy due to duplication.
That was when the internet in the UK was in its early years.
20 years later and the on-line market place is where it is largely at. A supplier my present company deals with told me that 95% of their commerce traffic is now done on-line without any human intervention. This supplier has recently built a massive warehouse in Holland where no human staff are employed. Automation and robotics is the new now.
This is the new business model.
When Toys R Us went bust a while back, I was shocked. This should have been a retail chain that should have survived, but it failed, as a casualty of super sites, like Ebay and Amazon - effectively the planet's middlemen.
Ebay and Amazon allow listing of items on their site, the same items often, the buyer makes a choice built on sales performance but mostly on price, the cheapest wins the deal. When an Amazon seller sells as a 3rd party supplier without the goods being in an Amazon warehouse, Amazon has a double win. It achieves a sale and revenue without the hassle and cost of storing, picking and transportation issues and takes a bit of revenue.
Plus it also helps if your company is based in a location with favourable tax levels and laws which the High Street mostly does not.
The on-line boom is good for some companies, but the convenience of on-line retail has taken its toll of the bricks and mortar brands, such as House of Fraser etc.
The on-liners can operate cheaper, they don't have to have numerous shop floor staff on hand even when customer foot fall is slack, they don't have the multiple stores' business rates, running costs, staff costs, they can buy in cheap and sell quickly on, they don't have big rents or big leases to pay for.
This is why a House of Fraser type of takeover was a good deal, a lot of Bricks and Mortar that can be sold off, brands that can be cherry picked by a buyer and then sold on, the liabilities and overheads can be sold or disposed of largely quite easily and quickly and the future direction decided on whatever the buyer's plan is.
If you run a chain of stores for example with dated looking products, relying on peak time footfall, you are going to be hit hard. And that's why Debenhams is a walking Dinosaur.
People are 'time poor' these days and why waste hours going to a town to shop and try and find a parking space at probably some high price, when you can order on-line and return the item if you don't like it? Without leaving your house.....
That's why the High Street is sinking, those with the disposable income (pensioners mainly) are shrinking as a population - the pre WW2 generation had maybe 2-5 plus children in a couple 'generation', in WW2 it was about 2 per couple 'generation' and in the 60's on, the ability to choose a family or not has altered the demographic downwards with many couples choosing no family as an option.
Shrinking the 'generational population' has potentially shrunk demand consumption of goods for those original to the UK, but is buoyed by those who have come to live in the UK.
As we have seen even the mighty FW Woolworths could not survive the onslaught of the web. It wasn't 'Amazon big enough' to offer what people wanted or might want, it didn't have the floorspace or the warehouse space to be an Amazon.
Where can the High Street survive? Well, in my view, only niche shops offering specialised or unique products (where there is a market to service supporting it) could survive. If you offer a service that other on-liners don't, clearly this is an advantage.
The bottom line is customer footfall - the punter coming into your shop and buying a product. We probably buy on-line from places we have never visited, never will and develop trading relationships with people we are likely ever to meet over the years.
Another key factor is how you deal with customer returns and warranty issues, the High Street business is good at that, they have the face to face contact to do so, but the faceless on-line retailer has to also do that too.
The High Street can't always better on-line price, it suffers from the overheads of staff, premises etc. On-line retailing cuts out human intervention to such a degree it more than pays for itself. If any humans work there, they are either packing the order or just booking the courier collection more than they may select the goods, depending on the set up.
Automation and robotics is taking over, algorythmical seeding is transforming marketing massively, sending the results to the iPhone or tablet, human intervention is shrinking.
When proxy living and big data get a hold and we subsume our 'daily dross' to computers to deal with, that will be a game-changer. The on-line situation will literally expand explosively.
Unless your High Street shop can offer something unique and or cheaper, pull the shutters down and sell up.
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