One of the unintended consequences of coronavirus has been the opportunity it has presented e-commerce retailers to take the centre of the ring and deliver another uppercut to the physical retail space. In this article, Business Leader explores why the argument is not just as simple as online retail versus the high street. The article also looks at how e-commerce retailers need to keep improving their customer journey, and asks business leaders to give their thoughts on whether an online sales tax would be a good or bad thing.
Us humans are interesting creatures, and we tend to want what we cannot have. It is a bit like that with going out to buy products and services because after a year of being in ‘lockdown’ – which saw an online retail boom – fewer retail sales took place online in April than a year earlier, as non-essential stores reopened from Lockdown 3.0, new figures suggest. Some 41.5% of sales were ecommerce ones this April, down from 68.8% in April 2020, during the first lockdown, according to the latest BRC-KPMG Retail Sales Monitor for April 2021.
This is interesting because it shows that physical retail still has a pulse, but also that it would be a safe bet to say that e-commerce could be the long-term winner, and that once consumers have had their fill of being in shops, many will drift back online again – or it is probably not that black and white and will end up a bit of both.
Certainly, even for traditional retailers who are now omni-channel, the picture has changed forever. Chris McShane, who is a Commercial Director a Halfords, says that the customer expectation is elevated.
He explains: “If you look at our customer experience three or four years ago, if they had a flat battery in a car for example, we might have stacked products on a shelf in 450 locations and promoted them through media and deals, but now customers expect a digital experience and journey that is contactless and knows what products they’ve had in the past and how this will fit with their future requirements.
‘The experience is mobile now and customers shouldn’t even have to leave their home, and they can decide to have their experience or a service as mundane as a battery change wherever they like. I think it is an important point because it is about meeting the expectation whether online or in-store.
“Amazon have set the standard for e-commerce, and we all need to meet that standard. I can get millions of products to my home within hours. Whereas, Apple have set the standard for the physical store experience.”
How will e-commerce change the high-street?
Chris’ point is important as it illustrates that, depending on the service, for many brands it’s going to be a case of both physical and online offerings.
It is also wrong to just frame the debate as online vs the high-street, as physical retail space was growing pre-pandemic – but just not in the traditional way.
Martin Bysh, CEO at Huboo, also feels that the high street does have a role to play.
He says: “The direction of travel has been away from the high street toward online for many products, for a long while. The pandemic has accelerated this, and the genie is not going back into the bottle.
“I don’t see why this needs to pose a problem for the high street, though – it may pose a problem for particular shops but there is an opportunity for others. You will go to the high street for the buzz and to socialise, and you will buy certain items, but for convenience, you will go online to buy some products too.
“I expect the high street to be full of services that you can’t buy online, like barbers, estate agents and tattooists.
“You’ll also find cafés, bars, restaurants and independents; and there will also be showrooms that are loss leaders for major online retailers, which generate most of their sales through e-commerce but want to build a brand with a physical outlet.”
Kate Hardcastle MBE, who is a tv personality and retail and small business champion, agrees with Martin that the high-street has a future but changes need to happen.
Kate says: “High streets are currently 9-5 retail environments and many of them across the UK are in a sad state. To fix this, we need a human high street with consumers at the heart, but you are going to need radical policy changes and support from government and local authorities because at the moment it’s just not viable for many to open a shop.
“I believe if we’re smart about it, the high street can solve some of the UK’s biggest problems like isolation and obesity. But we need to stop thinking of it as just a place where you have shops. I also believe that multi-purpose retail units will help too. If you put two or three complimentary and not conflicting businesses together in one unit, they can really grow and thrive and share resources.
“Funding and rates are part of this of course, but we also need to think about why people start micro businesses that will be on the high street, and it is often because of the work-life balance. If you are a carer, for example, you need to set your hours a different way and it is not about nine to five anymore, and we need to look at different opening hours and different experiences at our high streets.”
Preston Benson, who is the Founder of the Really Local Group, also believes revitalising town centre spaces is about thinking differently.
He says: “We’re turning vacant units into community-led assets that are comprised of cinemas, food halls, business space and employment training – we believe this multi-purpose approach is the future and can bring back vibrancy to these spaces. You need to create spaces for people that are inclusive and accessible.”
How will we pay for it all?
This new vision to revitalise our high-street space and the clever co-existence of online and physical is an appealing one, but with the local government and government coffers squeezed, is there anything left on the magic money tree to pay for it all?
Many have mooted an online sales tax. In a recent interview with Business Leader, Touker Suleyman advocated for it but said it should only apply to companies generating more than £10m online.
Martin Bysh completely disagrees with the idea. He explains: “These sorts of taxes don’t really work because what isn’t understood is how expensive it is to do business online. It is not a cheap replacement for business offline. If somebody comes into your store and buys something, you do not need to spend £4 or £5 shipping that item to them.
“Many online companies don’t have a huge margin at all, and government needs to be supporting the high street and not bullying online businesses and trying to reverse inevitable change. Let us make it possible to set up small businesses and get rid of expensive rates that are ridiculous. Greedy local governments should be doing their bit. This tax shows a fundamental misunderstanding of e-commerce and where it sits in the retail picture.”
Preston Benson says: “The amount of funding government receive from business rates suggests that we’re going to need new forms of taxation. People have not stopped buying less – they are buying differently. The proliferation of warehouses from giants like Amazon popping up in industrial spaces, whilst we are losing businesses from our towns and high streets, is something to look at and it would be interesting to see the numbers for this.
“I would support something that taxes the warehouses differently. There is no magic money tree, and if there are, its roots are shrivelling up. Supporting a tax on industrial growth rather than online sales tax could be an option I feel.”
David Young, who is the CEO at Bradfords Building Supplies, is also against an online sales tax.
He says: “E-commerce is strong where we have stores, and an online tax would be a mistake. To Preston’s point, I also have warehousing and industrial space at my stores, so I’d be interested to see how that works.
“Online retail is not actually profitable for us and we use it to drive football to our physical stores, so we need to be careful about how a tax like this is framed.”
A stick customer experience
Equally as pressing an issue as new taxation for online retailers is about how they can continue to remain relevant and meet customer expectations.
The journey needs to be slicker as consumer expectations have hardened, says Pol Sweeney, who is VP Sales & Country Manager at UK & Ireland for Descartes.
He explains: “In 2020, we were seeing fulfilment and e-commerce growing rapidly and operating at twice the volumes of the Christmas peak of 2019. This increase in volumes and density has thrown up challenges for online retailers and put a lens on the consumer experience, how they develop a brand and, ultimately, how they achieve an aspiration of improving deliveries and same day becoming the norm.”
Regarding what more online companies can do to impress consumers and build their loyalty, Kate says: “It’s all about communications and looking at what information are you giving to your customer? Also, how environmentally friendly is the packaging? It is not just about a sale but serving and building better engagement.
“I see so many missed opportunities when I order online. For example, a packing slip with no information on it, or a huge package arriving with just a tiny product in it. If you have a message on a website saying you are ethical and then you send out packaging that is not environmentally friendly, consumer won’t engage with you for long.
“If as a leader of an e-commerce business you are not getting a delivery every week of your own products, I’d be very worried and I’d be making sure I’m doing this. Too much is cut and copy and paste and lacking in customer interaction.”
Kate also says that Lego provide a good example of a smooth clicks to collect process that goes above and beyond.
She says: “Lego’s commitment to deliver any missing piece for free is a high-ranking statement of making sure you are building consumer relationships for many years. It’s about that small attention to detail – and it’s authentic as it cuts above the advertising line.”
On how online retailers can improve their offering, Martin comments: “Firstly, this isn’t just about the bigger brands because it’s easier for smaller brands to create an amazing experience, as scale brings its own problems. Also, some people set up online businesses thinking they do not need to engage with the customer and somehow service is left behind when you close your shop – but the opposite is true. You need to work harder to gain customer loyalty.
“Personal packing can make a difference too, and I don’t necessarily think that same-day delivery is the main driver as long as people know when their product is going to be delivered and it arrives at the time they’ve been told.”
The role of technology
So, what role might technology play in the future of retail and the consumer experience?
David says it is all about the customer. He says: “I see artificial intelligence being used to serve consumer products that are highly relevant to them, both online and in-store. Customer data is key too and making sure that what you put in front of your customers is relevant and personal to them.”
Kate has some concerns about technology in the retail space though: “There is nothing more frustrating than going into a store and seeing a huge black screen on the wall because nobody knows how to use the tech; or wearing virtual reality (VR) helmets in stores but it not leading to anything that resembles a positive customer experience. A lot of budget is being spent on technology, but it must be right and not a case of tech for tech’s sake. What is the benefit of the customer using the technology?
“It’s an issue for online companies too. It’s happening too often that a website is adopting very clever technology, but you can’t find a telephone number, or you can’t get hold of somebody to talk to. Automation has to take away stress and enhance the experience – not add to it.”