Evolve or Be Extinct – Online and Offline Sales Balance Crucial for Retailers

A recent report by The Local Data Company has found 14.6% – just under one in seven – of all retail premises are now empty. 2012 has been the worst year yet since we have were plunged into a “recession” in 2008 with 54 large chain retailers and almost 48,000 employees at these stores alone being affected.

There can be many reasons for this. One explanation may be a second economic downturn typified by poor retail sales. Many large companies could survive a year or so in a recession but four years of low profits and high losses has simply been just too much.

Looking at some of the Companies that have been significantly affected over the last five years makes astounding reading. At this point I must add that some of these companies have recovered and come out of administration, and a few have been bought in their final hour of need, but all of whom have had a very public tough few years.

The Ever-Increasing list of Retailers affected over the last 4 Years includes Comet, JJB Sports, Clinton Cards, Game, Borders, Barratts, T J Hughes, Habitat, Focus DIY, Floors-2-Go, the Officers Club, Oddbins, Ethel Austin, Faith Shoes, Adams Childrenswear, Principles, Woolworths, MFI, and Zavvi/Virgin Megastore.

Reality

An explanation that may not be as easy to bear for many retailers is that they simply haven’t evolved over recent years. For every Industry and Market where many companies have gone into serious financial trouble, there is also a company that has been successful, a company that has been innovative and found the correct balance between their offline and online business.

Below is a list of companies that have gone out of business over the last 3 years and a company that has excelled in that particular market. It would be very easy to use Tesco, Amazon, and even Primark as companies who have taken their market share but that would be far too easy. Their monopolies are based on many factors, but in Tesco and Primark’s case, Economies of Scales would be a good place to start.

Over 50% of all retail sales are now influenced by Online and the figure only continues to rise. This isn’t just a direct sale but also using the website as a reference point for price and following up with a purchase in store. If a company has a poor online presence then they are effectively not even in the race. Looking at the list above of the companies who are now key players in their market, all of these companies have a significant online presence, many of whom are solely online.

One of the key differentiators between offline and online stores is the direct overheads. A physical store has to pay rent, electricity and several other costs before staff wages has even entered the mix. An online store who dropship their products will have to pay the wages of staff but typically the number of employees would be less and overall costs of selling a products will be significantly less than an exclusively offline store.

Recent Success

ASOS are an online retailer of branded and own-brand fashion clothing and have no physical store in the UK. Retail analysts predicts Asos will see annual sales top £1bn in three years. ASOS offer cutting edge and stylish fashion to the young trendies of the UK but this is not what make ASOS so successfully online. ASOS have changed the game with their excellent web presence, super fast delivery and completely free returns.  ASOS also have a first class responsive mobile site which has become an integral part of their online business strategy.

John lewis, Debenhams, Arcadia Group (Topman & Topshop) and Next are all living breathing proof that you can survive as a retailer whilst having hundreds of stores nationally. Debenhams have gone on record and stated “like-for-like sales rose 5pc in the five weeks up to January 5, achieving its highest ever sales in December”. Debenhams which has in excess of 150 stores in the UK, announced “good sales momentum” in the 18 weeks to January 5. Debenhams online presence drove sales, beating expectations, with sales up 39pc over the same 18 week period.” Debenhams stated themselves that one of the key factors in this recent success was their online offers over the Christmas period.

John Lewis also published impressive Christmas figures. Sales for the five weeks up to 29 December 2012 totalled £684.8m, up 14.8% compared with last year. Home Technology and Electrical sales were the biggest drivers for John Lewis, with sales up 30.9% on last year. By looking at John Lewis’ On-Page SEO it is easy to see which one product was a big component in the  “Home Technology” and “Electrical” success, but more so, John Lewis’ ability to market that product online. John Lewis’ Online sales made a big impact this year – with sales up a whopping 44.3% on 2011, in line with other big name retailers. The website now accounts for over a quarter of the total John Lewis business. John Lewis has very much evolved.

                                                                                                                                                                                                                                                      If your online strategy is still an afterthought, 2013 is the year that this MUST change. Mary Portas, who is determined in her approach to reinvigorate the Great British High Street doesn’t talk about having an excellent online strategy and it is time to incorporate this into her masterplan. I completely agree that sometimes there is no substitute for buying a product in-store, however, astute shoppers will price-check the item before they take the plunge on a luxury purchase.

Online Sales helps to drive Offline Sales. Debenhams and John Lewis’ success over Christmas did not just miraculously happen by accident.