| What about the internet?
You don't seem to be able to open a newspaper or turn on the TV or
radio without hearing a report of another dot com business going under.
Even eMarketer, (www.emarketer.com), the insiders' online bible now has a
"fatalities" column. Online retail seems to be burning vast
amounts of money for little return. So it is very easy to turn a blind eye
and discount online retail as a potential threat.
According to Goldman
Sachs and PC Data Online, holiday shoppers spent $1.132 billion online
during the week of 19 November 2000. Online shoppers spent only 25% of
their holiday budget online in 1999. This year, they expect to spend 38%:
Are all sectors of retailing equally exposed to online challenges? If
you believe the hardline e-commerce pundits then yes, everyone from
ice-cream sales people to those selling fish tanks, are equally
challenged. However, the simple fact is that some sectors are more suited
to web sales than others. Books, records, financial services all spring to
mind as web naturals. Certain customer segments are again well suited to
online shopping. Younger males in good jobs seem to be the profile, and
they are looking for a bargain. So the retail playing field is far from
level and this is bound to have an impact on location and store
catchments.
In the UK there has been a trend over the past 10 - 15 years for
electrical goods retailing to locate on the edge of towns, either as a
stand-alone store or in a retail park. Massive sheds of up to 40,000
square feet became the Mecca for the those buying electrical gadgets. The
strategy of being so big, offering a vast range and keen pricing with
money back guarantees if a product can be bought cheaper elswhere, has
been very successful. But this is a market in which the web is a serious
contender. Those buying electrical goods can price compare online and have
access to a vast array of offerings, and are by and large, sophisticated
enough to realise this.
The growth of internet shopping is hitting the value of out-of-town
retail centres, according to the UK's largest listed property firm. Land
Securities, developer of sites including Birmingham's Bull Ring and
Bristol's Broadmead, blamed e-commerce for aiding a 2% decline in the
value of its £1.37bn shopping centre portfolio.
What is being found is that the branded names are not so badly
affected, because people will still be prepared to pay for them. Discount
stores are also not so badly affected. It is the middle area of retail
that is being the worst hit.
How this will affect how and where stores choose to locate is too early
to tell. The convenience factor of popping around the corner is still a
major factor especially if your toaster has just blown up!
But, and it is a big but, stores will be taking notice of the
e-literacy of the people in their catchments when making locational and
marketing decisions.
Small businesses, focussed on exceptional customer service and
convenience, clearly have an advantage in the internet era. The challenge
may well impact most on the larger chains.
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