The Christmas trading period is important to all retailers and for some it brings in a third of their annual turnover. But there are fears this year - based on ONS statistics and trade figures- that High Street retailers are struggling and the collapse of Comet, withdrawal of Best Buy from the UK and difficulties at Thomas Cook and HMV suggest this could be the case.
The difficult trading climate has prompted much discussion amongst retail commentators, writers and strategists who have suggested reasons why shoppers are staying away from the High Street this Christmas. Unseasonably warm weather and city councils introducing more and higher parking charges are just two reasons but online shopping is seen to be having the most significant effect on current shopper behaviour.
But is the rise in online shopping bad news for the retail industry as a whole? The majority of High Street retailers now sell online and the internet is no longer considered in isolation but is part of established retailers' multi-channel strategies, which maximises consumer choice, allowing them to shop whenever and wherever they wish. Even in their pyjamas!
Arguably, the growth in online shopping is good news for the retail industry and the economy, as it is not only providing consumers with access to a vast range of retailers and a huge variety of goods but is also creating employment. Dixon Retail employed an extra 700 staff to handle Christmas online orders at their massive distribution centre in Newark and Amazon’s staff processed over 2.3 million orders at their warehouses in Milton Keynes.
To put these sales into perspective it is important to recognise that currently, online shopping represents about 10 per cent of total sales and so is still a relatively small proportion of the total shopping basket. According to research by Doherty & Ellis-Chadwick (2010), retailers have been making a serious attempt to trade online since mid-1990s and there have been plenty of predictions about the scale scope and impact of the virtual world and how it will change or even replace the physical High Street.
So to what extent does our increased appetite for shopping online at Christmas mean the High Street is going to disappear or be radically reconfigured in the near future? During the last 15 years many studies have pointed to three key threats to the High Street: 1) getting rid of the middle man; 2) the rise of the virtual merchant 3) retailers cannibalising their own custom as shoppers move from the high street to online. But analysis suggest that these threats have not (yet) been as powerful as predicted.
There is no doubt that online shopping is on the increase but threat 1, disintermediation - the elimination of the middle man – is not leading to manufacturers taking trade from all of our retailers except in the music industry, and parts of the travel business where online shopping is having a profound and perhaps destructive impact.
Threat 2, new online only retailers are not putting traditional retailers out of business as established retailers are leveraging their resources, skills and capabilities to tackle the challenges of the online trading environment. Again, there are notable exceptions e.g. Amazon a cyber newcomer. But Amazon has been a market maker rather than a destroyer; many years of investment and belief in the online market by Jeff Bezos, Amazon’s founder, has enabled the online market to become a mainstream shopping environment .
Threat 3, selling through more than one channel is not having the predicted negative effect in fact for many established retailers adding online shopping to their portfolio is an extremely rewarding strategy and successful online operations have been proven to increase footfall in High Street stores.
The evidence suggests that fears that the internet will replace the High Street are exaggerated and overblown, and in the short term, at least online shopping is unlikely to quell consumers appetite for going shopping in city and out of town stores. However, retailers cannot afford to rest on their laurels sipping festive spirits as the Internet is changing consumer shopping experiences and they are becoming more demanding by the hour.
So by the time Santa has delivered his last parcel, shoppers around the world will be spending their Christmas money online in the January sales.