Internet usage has steadily increased over past years with 78% of the UK population having access to the Internet in 2013. This continued growth in ecommerce engagement activities highlights major challenges facing the UK high street, with around 25% of total UK sales being conducted online by 2020, driven by m-commerce. The Internet has become the second most important distribution channel (after high street retailing), and has established itself as a major source of customer information, boasting opportunity to enhance the overall shopping experience. The Internet (Web 2.0) has made the growth in direct contact between producers and consumers possible- essentially, making the traditional physical retailer redundant in some areas.
It has been reported that the high street is in abject decline across the UK with the consumer shopping behaviour moving towards a preference for ‘click and flick’ rather than brick. Essentially, bricks and mortar spaces will to be reduced to their most utilitarian functionality in order to adapt to changes in consumer behaviour. One key assumption of traditional retail marketing is that the consumer must inevitably visit the high street or store to make a purchase. The introduction of “virtual competitors” introduces a wider set of complexities and opportunities for retailers including readily available price comparisons, less barriers for international competitors and lower prices due to lower fixed costs for “pure play retailers”.
It is largely suggested that the key challenge for the physical high street relates to the extent to which consumer expectations have been raised by digital retailing, with; 24/7 availability, instant price comparison checks, endless supplies of known stock, personalised product suggestions and consumer to consumer conversations, becoming increasingly accessible online. Consumers are progressively worried about convenience and availability, and in recent decades have increasingly chosen to shop in out of town parks and malls- persuaded by value, convenience and choice not available on the high street. Ultimately, e-tailers have additional tools and resources in place to ensure a better shopping experience for the consumer.
The Experience Economy
The changing perception of retail is largely fuelled during the “Evaluation” and “Purchase” stages of the Consumer Decision Process, through the concept of the “experience economy”. Shoppers are now becoming visitors to retail spaces with the expectation that they will be enjoying an experience, rather than solely visiting with a purchase intention. In terms of the Consumer Decision Process, this contributes significant importance to “atmospherics” confirming classic work by Pine & Gilmore (1998) suggesting that in order to distinguish retailers from online stores, businesses must “orchestrate memorable purchase environments for their customers.” Essentially, the degree to which a company is able to deliver a desirable experience that meets or exceeds customer expectations, will largely determine the success of this business in the marketplace. Research by Deloitte further support this, arguing that it is the experiential elements of the physical high street and online shopping that distinguish one from the other.
The Digital Economy
Changing demographics on a local level as well as an aging population are factors that have contributed to the demise of the UK high street. KPMG conducted a study and found that “by 2030, the number of people aged 65 or older (known as the grey pound) is projected to reach 15.5 million, growing 43% from its level in 2012”. The group suggests that over the next ten years, two thirds of all retail spending growth will come from this older age group, and therefore predict that in order to attract more of the grey pound retailers must rethink all aspects of marketing communications including store design. Nevertheless, Nick Bubb (KPMG) claims “the boom in the take up of smartphone and tablet device technology (and the related explosion in the power of social networking) is a bigger influence on the pattern of retail spending than demographic change.”
The digital economy is described as the preeminent driver of economic growth and social change. Similarly, a digital society is defined as “a modern, progressive society that is formed as a result of the adoption and integration of information and communication technologies at home, work and education. As such, it is widely accepted within literature that growth of the digital economy will lead to extensive transformations to the economy as a whole- with the Boston Consulting Group discussing “four waves of change sweeping over consumer goods and retail”, as an example.
Waves of technology adoption also had an implicit affect on high street retailers- with the first wave of Internet retailers, or “pure play retailers” (including Amazon and Netflix) developing a new channel to communicate with their customers, challenging the established marketing channels of retail stores, catalogue sales and home shopping. The second wave of e-retailers was said to include those with traditional bricks and mortar stores, and highlighted the idea of channel conflict and sales cannibalization, with the Internet channel becoming a competitor for physical distribution channels.
Mobile in store experiences
A report by Econsultancy (2012) showed that 43% of UK shoppers use their smartphones while on the move to compare prices and read product reviews. This change in shopper habits is evidence that consumers always have access to the mobile internet, with an iModerate survey also finding that more than half of smartphone owners are using the internet in stores. Through Web 2.0 applications, consumers can access much more information than was possible ten years ago. Importantly, this information can be of a higher quality (through using RIA or mashups applications), more trustworthy (other users’ opinions from a virtual community), more easily processed (applications for price/product comparisons) and more easily edited than ever before.
Nevertheless, this is not necessarily a bad thing for retailers. In the past year, the use of iBeacon technology has been on the rise, with companies creating apps to bridge the communication gap and engage more with customers in store. Dyson MD, David Hollander explains to Retail Week that retailers can benefit from taking full advantage of the role physical stores play in shoppers’ buying decisions. He elaborates, noting “82% of our customers research online but an even bigger number do so in store. We need the in store experience, so it is appropriate to reward retailers that provide a service to shoppers than we benefit from”.
Manufacturing a social in store experience with purchases delivered direct to the consumer could be another way of combatting challenges facing the UK high street by building on the offering currently available online. The idea of a customised high street, be it through digital store fronts or the use of QR codes linked with social media, is considered a viable option in improving information and communication flows. In practice it is evident that businesses are progressively using collaborative methods (usually via social networking sites) to involve customers or networks within the production process.
Ultimately, the future of the high street means more choice, lower prices and better services- all factors likely to lead to the downsizing of physical space retailers unless they actively chase the modern consumer using technological developments. Consumers today have vastly different and sophisticated expectations of product, service and value and in such a rapidly changing environment, a combination of factors have meant that some retailers are left unable to react fast enough. It is evident that economic influencers and technological advances have collectively reshaped the retail landscape, and as a consequence retailers are increasingly focusing on the customer experience as a creation of value. Deloitte reports that in the new multichannel reality, the lines between virtual and physical space are becoming blurred and retailers are forced to question the role and function of stores. However, while they do not advocate the total redundancy of the role of the physical space, they do indicate that physical spaces are likely to shrink and experience a change in format and in order to avoid failure in the long run, retailers and marketers must be willing to adapt.