With HMV the latest High Street store to falter, what has gone wrong and how tcan they stop the rot?
With HMV calling in the administrators, yet another High Street giant has gone to the wall in the last few months alone, joining the likes of Comet and Jessops.
Just what has gone wrong, and what can save the British High Street from its terminal decline?
When electronic retailer Comet recently announced that it was entering administration, a poll indicated that consumers blame the rise of online-only retailers for the demise of High Street stores.
A flash poll by
VoucherCodesPro found that 88% of consumers believe companies such as Amazon and eBay are responsible for the decline, in particular because they are able to charge less for products than High Street retailers as they pay less tax – alluding to the recent enquiry into tax payments from Amazon, Starbucks and Google.
But despite the uneasiness over the issue of tax payments, and the impact these brands are having on the British High Street, a staggering 71% of regular online-only retailers said they would continue to buy from them, showing price trumps loyalty.
George Charles, MD of VoucherCodesPro.co.uk, said: “Two things are clear; consumers blame Amazon and eBay for Comet’s unfortunate end and brand loyalty is dead, with price being the deciding factor. The fact that consumers blame Amazon and eBay, many specifically referencing Amazon’s tax situation, yet clearly state they plan to keep shopping with them is quite a bleak sign for the future of the UK High Street.”
Many experts have laid the blame for the faltering High Street retailers on a lack of digital and technology-focused strategies from many of the stores.
Comet, for instance, was criticised for having failed to implement a coherent web, ecommerce and mobile strategy by Dan Wagner, CEO and chairman of mPowa and Powa Technologies, which is responsible for implementing online and mobile retail platforms for some of the leading High Street names. “For a store of its stature, Comet was relatively late to the party with regard to online retail, and as it result spent much of its time playing catch-up,” he said. “The consumer electronics market has been particularly competitive of late, and those who have invested heavily in a
multichannel strategy have reaped the rewards.”
Wagner believes there are similar reasons for HMV’s downfall.
“Although HMV has introduced various promotions to drive sales, the shift in the way consumers are buying goods has had far-reaching implications,” he explained. “Internet shopping is now more popular in the UK than any other country in the world, with UK spending an average of £1,083 a year on shopping online. While this is good news for British ecommerce businesses, those that didn’t have a digitally focused strategy from the outset are now playing catch-up and the consequences are clear to see.
“Although HMV responded to its changing customer demands by moving towards a technology focused strategy with the sale of headphones and tablets, it appears that this strategy has not been able to compensate for the fall in CD and DVD revenue. Competition from iTunes and Amazon seems to have contributed to the fall in sales for HMV.”
How can the High Street be saved?
Wagner has suggested that High Street retailers must adapt or die when it comes to online and offline strategies.
“Many more retailers could succumb to a similar fate because of the cumulative effect of poor sales. Retailers have to stay ahead of the game and have an effective online and offline strategy in place if they are to survive in this new technology-focused era,” he said.
Jeremy Michael, managing director of customer insight agency SMG, has also added that the strategies must be in sync – with brands having an
omnichannel strategy.
"The key to a successful e-retail strategy is ensuring that the brand website matches the in-store consumer experience, with both accurately representing the brand’s core values. As online shopping has grown in popularity, many retailers have invested in websites without developing a clear and cohesive omnichannel strategy,” he said.
“Establishing a clear brand identity is crucial to establishing a loyal consumer fan base and retaining customers. As the high street evolves, so will consumers, but they will require a consistent brand message across digital and high street platforms. Retailers can then drive sales, improve customer loyalty and successfully navigate the important festive period.”
Jacqueline de Rojas, VP and general manager CA Technologies UKI, believes that the High Street retailers must also demonstrate more innovation in what is an increasingly digital market.
“Having failed to invest in ‘online technologies’ in the early 90s, HMV has been battling with online retailers such as Amazon, iTunes and online music streaming sites such as Spotify and Last FM for some years now. The news confirms that it has clearly been unable to react to the this new and highly competitive market,” she said.” HMV, like many of the UK’s high street retailers, proved unable to diversify its business in order to compete effectively. Jessops, which went into administration last week, is another example of a high street store which has failed to innovate and embrace new technology and multichannel strategies.
“To have any chance of turning around their fortunes retailers must be prepared to make bold decisions right now, embrace new technologies to reach their markets and to find more effective ways of working. Progressive ideas at pace are needed. This may mean radical change – but there are no sacred cows when it comes to the UK High Street. Customers are no longer willing to stand in queues, instead preferring to place orders online or through mobile applications. So placing more emphasis on their online business and multichannel strategy is critical to survival. Now more than ever, High Street retailers must learn from the mistakes of others and not bury their heads in the sand; It seems to be a clear case of innovate or die.”
But what innovations should bricks and mortar retailers be considering to stop the rot? Research released by Steria further underlines the importance of innovation, and also demonstrates the fact that there is a consumer desire for technological innovation from the High Street. The research found that many consumers still look to the High Street to address their retail needs, but it also emphasised that they would welcome a number of technological innovations to improve the experience:
- 40% of respondents said they’d like to be sent offers and discounts on their mobile device, online or in-store in real-time (i.e. instantly), depending on the items already in their basket/
- 69% said they’d like loyalty schemes that are more personalised, where rewards and offers are unique and based on their preferences or transaction history'.
- 33% said they’d like the ability to use their mobile as a personal shopping companion in-store (e.g. receiving information on products, promotions, checking previous purchases, etc.).
Importantly, some of these innovations could not only deliver customer loyalty but also additional revenue. A significant percentage of participants said they would shop more at a particular store if it offered the following services:
- 35% – Click and collect.
- 31% – Locate the products in-store before you arrive.
- 29% – Build a shopping list online or on a mobile phone with pre-ordered goods waiting for you when they arrive at store.
Geraint Evans, multichannel director at Steria UK, concluded: “Despite a number of high profile causalities, today’s findings indicate that there is plenty of life left in the British High Street. While the internet has clearly chipped away at the sales of physical stores, we now know that we are not facing the inexorable march to digital that many predicted. There are many items which consumers still prefer to buy in person, particularly groceries, DIY equipment, health and beauty products and furniture.
“However, it’s also clear from our research that consumers would welcome innovations brought from the web to improve the retail experience on Britain’s High Streets. For a sector looking to re-establish growth in wake of a double dip recession, offering the option of innovative services like click and connect and easy product location could be significant.”
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My take on HMV, Jessops and now sadly Blockbuster is that the central business model was no longer sustainable. Building additional channels or routes to an irrelevant business model won't make it any more desirable to consumers.
IMO, true digital transformation is a recognition that the entire business needs to transform around digital. HMV could have created a Music As A Service model before Spotify. But they failed to digitally innovate. Blockbuster could have created LoveFilm or Netflix before both of them. Again, they failed to innovate.
If you don't innovate, someone else will. That innovation creates disruption which often takes down the market leaders of yesterday. Interestingly it's not a new phenomena, it's been happening for decades.
David Sealey
http://www.thesealeys.co.uk/
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