Nathan Davies

Sociological Implications of Digital Retail

28th February, 2016

Sociological Implications of Digital Retail

With consumers now increasingly interested in seeking the best price and quality at their own leisure, it's unsurprising to see that digital retail alone has been approached by over half the active users on the internet [1]. This increase in eCommerce activity depicts an unpleasant future for physical retail.

Rise in Online Shopping

The past decade has seen a sharp increase in online shopping, now with over triple the number of online checkouts [2]. In the UK alone, online shopping has gained a 12.7% share of the retail industry, this expansion is expected to reach beyond 20% by the end of 2018 [3].

It's easy to understand the motivation for online shoppers:

A study by the Daily Mail (2013) [7] highlights the shift to online grocery shopping, especially for families where the task is described as a chore, "trudging the long, soulless aisles". Resorting to online shopping has improved the amount of time families get to spend together, strengthening family bonds brings with it an endless list of positives. The expansion of online grocery shopping alone is expected to rise by 126% in the next five years [7].

Implications on Physical Retail

The biggest criticism of online retail is that this technology is said to be causing “high street armageddon” [8], having a potential effect on the vibrant local communities.

Decline in Stores

The development of web 2.0 brought with it great enhancements that developers still utilise today, importantly the web became dynamic and this ability to move away from limiting static webpages meant that online retailing could succeed.

The number of retail stores 1950 - 2012
Figure 1 shows the decline in retail stores during 1950 - 2012

Harnessing the internet as a tool for retail seen great benefits and the impact to physical retail had begun, figure 1 shows the decrement of store numbers from the year 2000 onwards. This reduction has jumped significantly in recent years (2009 and 2012), this pace is expected to increase with an estimated 61,930 stores to close by 2018 [3].

Technology has revolutionised the way we acquire media; the ability to download media files eliminates the need for hard copies (which are easily vulnerable to loss or damage). The major online media store iTunes earlier this year celebrated it's 25 billionth song download [9], and Netflix is not far of celebrating 30 million paid subscribers [10].

With the acceptance and increased use of these technologies it's unsurprising that physical stores again face the brunt. Once a giant, Blockbuster was forced to reduce it's profile with constant store closures [11][12]. Zavvi's administration seen a nationwide shutdown of stores [13], now only operating as a sustained online retailer.

A lot of once major companies have shutdown from the affects of internet phenomena, it's estimated that a further 164 well established companies are to go into administration by 2018 [14] based on current trends.

This frightful insight taunts stores, with companies taking precautionary actions. Tesco recently announced it will no longer develop 100 sites [15] as the growth is no longer required, instead focus will be aimed towards online retail [7]. Additional major retailers are following a similar pattern, finding additional use for their land [such as sub-letting areas] to maximise land profitability [3].

A sad truth is that the reduction of stores will incur inevitable job losses, this is expected to affect 316,000 people by 2018 [3].

Disadvantages

The infamous task of finding somewhere to park has been a burden on high streets for a long time. Furthermore the pricing of carparks have seen an all time high, putting off potential customers; a survey in 2012 revealed that 7/10 people avoided shopping areas as a factor of high price parking [15].

With the exception of finding bargains, it's more likely that the overall cost will be greater than offerings found online; stores have to cover their upkeep and also fund the staff to retain store functionality, this will be reflected in the price. To give a perspective on initial expenditure, stores within the centre of towns may pay £1,000 per square meter, outside of town [distribution centres], the cost is considerably lower at around £40 [16].

Clone towns [a term used to describe high streets predominately occupied by chain stores] remove a sense of distinctiveness and enjoyment, a report by NEF (2004) [17] summarises these towns as having little diversity, "the same film on every screen" and "the same song on every radio"; this characteristic repels people from wishing to explore alternative towns.

High streets can lack the funding from local authorities, causing implications on vital regeneration projects [18]. This fact comes to light recently, with a noticeable impact by the economy downturn.

Along with the advantages of online retail, these factors will undoubtably sway custom away from the high street.

Advantages

It's reassuring that this does't value high streets useless, they have fundamental positives that will always be in demand.

Tourism and fundamental last minute purchases will always require physical retail. Convenience stores are performing tremendously from a cultural shift towards top-up shopping [7], this “little and often” approach could excel if a law for 15 minutes of parking on double yellows is approved [19].

There's also the ability to personally experience products, typically useful with clothing items where the consumer may be doubtful as to what will be the most comfortable fitting. An experience you will never get with online shopping.

Adapting to Digital Trends

Alan Briggs, managing director of Dynamic Business Strategies states that:

The internet has made a massive difference to the way that consumers make purchases or shop in general. Many retailers have not recognised the need for a website or at best they just have a simple brochure website [16].

As a testament to that statement, most major retailers are keeping up with that cultural change and developing a greater presence online.

Tesco were eager to expand into the online industry from as early as 1996 [20]. Tesco seen that it was important to not to reinvent themselves but to instead still offer the same service in-stores, just adapt to allow for home delivery services to be run from the same buildings; this was important as it eliminated the need for additional distribution centres and utilised existing staff members. Tesco now serve half a million customers online every week [21].

Price comparison has become a popular feature for most retails, it showcases a competitive side to the industry, aiming to reassure consumers they they've found the best price. It's purpose is to lure custom in, but modern eras now mean that consumers can compare on-the-go; applications for mobiles can be used to scan an item, resulting in a list of retailers and their price. This method will present a major change in consumers behaviour, being able to compare prices before checkout could direct the customer's loyalties elsewhere; with a fickle set of customers, predictions for required stock and quarterly performance will be unbalanced.

Naturally Benefitting from Digital Trends

The nature of some companies benefit from the increase of online consumerism; most noticeably, parcel delivery services have seen constant record breaking profits [22]. These services once seen a mighty negative impact from other internet phenomenas like email and social networking.

Future of High Streets

The face of high streets are forever changing, and the cultural shift to online retail has and will continue to impact upon that factor.

Retail is now at the point where it's important to have an online presence. Looking back over the 'Adapting to Digital Trends' section of this report, an immediate quote from Briggs makes use of the word "need" over 'want' which highlights the significance to survival in retail; this quote speaks out, saying that if you have an online preference to reinforce your business then you're more likely to succeed.

Briggs' rational statement isn't extreme either, retail survives off consumers and if they are going elsewhere then to succeed retailers need to follow or lead that market. With the rapid and continual advancements of online retail, imagine what will be possible in 10 or even 5 years time.

This November, Birdback presents: 'Hack the High Street' (2013) [23] which will bring together a group of professionals to 'hack' together innovative ways of combining digital and physical retail for the better.

Physical retail won't decline rapidly, as there is still a vast need for it; but major retailers may gradually continue to reduce stores and staff which will impact heavily on society. As has happened for many years though, these unused areas will be reoccupied; there are still markets out there that succeed around these cultures.

Cafes and restaurants for example, have been able to sustain great performance on the high street, with the customer occasionally making use of the resources as a meeting place or even to work. To entice further custom, a lot of these stores have made the decision to offer internet; even Google see the importance of pairing cafes and restaurants with the internet [24].

In an example given by Google, The Web-Deprived Study at McDonalds by Anton Troianovski (2013) [25] speaks of a case where an individual would go to McDonalds just for the online access being offered, and not initially to experience their food and/or drink range.

It's horrible imagining a town centre of cafes and restaurants, but thankfully other concepts will come along that will be able to positively exploit niche markets, giving them some sense of security to be able to sustain stores on the high street.

It's key to get the proposition right for the customer, Lloyd-Jones (2013) [16] believes that now is the time to try something new given the lack of consumer confidence in all business sections, so there could be exciting times ahead for high streets.

In the circumstance that stores do fade out, then it's likely that the high street status will be lost and the old abandoned stores will be converted into housing [3]. This will be destroying precious vibrant communities, but just like mail services have recovered, there may see a positive upturn for these affected areas.

References

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  2. Dave Chaffey (2013). Forecast Growth in Percentage of Online Retail / eCommerce Sales [online]. Available at: http://www.smartinsights.com/digital-marketing-strategy/online-retail-sales-growth. [Accessed 28th October 2013].
  3. Centre for Retail Research (2013). Retail in 2018 - Shop Numbers, Online and the High Street [online]. Available at: http://www.retailresearch.org/retail2018.php. [Accessed 28th October 2013].
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