How many retail stores will get flattened in the digital tsunami?

Apr 13, 2011 Comments Off by

The trends of the digital age are finally getting noticed by many slow-to-move retail shops who thought they had a nice safe captive local market of customers. Now new online stores are challenging local stores by selling into the once safe backyard, and it is made worse for retail shops as customers realize how easy it is to buy great products online securely.

Writing for WA Business News, business writer Tim Treadgold produced a fascinating article today (13 April 2011) and quoted a range of stats that shed more light on  the problems of retailers here and around the world.  You can read Tim’s original article here on the Business News website.

Retailing Today

Some of the retailing stats are pretty interesting… Here is a small extract of what Tim wrote:

“Evans & Partners, a boutique Melbourne stockbroking firm, last week provided a useful look into the way the internet is changing shopping habits. In a graph plotting retail sales, and expectations of future sales, it shows that:

- Three years ago 95% of retailers surveyed expected less than 0.5% of their sales would be over the internet and 5% expected to do between 5%-and-10% over the internet.

- Over the past 12-months the sales experience has actually been 61% of retailers achieving that less than 0.5%, 30% doing between 5%-and-10% of sales over the net, and 9% of retailers doing between 10%-and-20% of their business over the internet.

- For the next three years the expectation trail is that just 5% expect internet sales of less than 0.5%, 52% expect to be between 5%-and-10%, 35% expect to be between 10%-and-20%, and 8% expect to be doing more than 20% of their business over the internet.

The astonishing aspect of that survey is that it covers a six year period. Three in the past, when the internet was somewhere over the horizon for most retailers, to the dreadful dawning of today, and three years into the future.  Which comes back to the opening point, a realisation that owning a bricks and mortar shop is becoming an unbearable cost for many retailers, and a drag on investment portfolios.

The internet revolution is moving on, having claimed music shops and bookstores, it is now stalking virtually everything else.”

Yes, the Internet revolution IS moving on.   The percentages of sales expectations for the future almost don’t matter.  These businesses are probably guessing and hoping.

Lots of retailers are going to get flattened in the tsunami.  Some will morph, many will cease to exist. I wonder how many of them are making smart plans to create the future they want?

Is Retailing Just About Price

Tim suggests that the Internet may have been over the horizon for most retailers three years ago.  It was clearly visible – except for those retailers who had their heads in the sand.

Yes, the Internet has become more visible in the last few years. Customers no longer have to pay exorbitantly high prices at high margin retail shops., but it’s not just about price.

  • Customers are more informed by their peers and by trusted experts.
  • Customers have smartphones in their hands when they walk into stores. They can and do easily find competitive comparisons online.
  • Currency changes help make international online shopping more attractive.
  • Online stores can more easily offer a far wider range of stock choices than a physical store.
  • Fast delivery times and credible guarantees also make a huge difference.  (Some online stores provide better guarantees than real-world shops. They have to offer more so they tempt and convince the unsure customer to win the business.)
  • Online stores are often geared up to better service and develop meaningful relationships with their customers.

Against that, one of the key benefits physical stores can offer is the local convenience of being able to see, touch and feel the product. LOCAL CONVENIENCE.  How much is this worth?  Sometimes a lot. Sometimes not.

The Trends Roll Along

The big picture digital age trends roll along like an exciting but also frightening digital tsunami.  Some businesses get up to speed with smart strategies.  They learn to catch the waves and the trends and grow their business effectively.

Others have so much invested in the past that they can’t move quickly enough to avoid and evade the new digital competitors.  Some are slaves to their businesses, but they are enslaved with legacy balls and chains of old systems, old cultures and old business models that are increasingly less effective.

Revolutionary Competitors are emerging in every industry.  Middle-men businesses are being challenged as never before.

Some business owners will face a slow, painful and lingering death of a thousand cuts as they grapple unsuccessfully to react.

In amongst it all, opportunities abound for those who can see and navigate their way through the morphing maze of business in the digital age. Understand the big trends, plan for them to continue and  make plans for how your business can prosper.

And don’t let technology fool you. Technology offers new tools to service customers more effectively – faster, smarter and with more value.

But more value does not have to mean being the lowest price.  Trying to sell cheap at the lowest price becomes a no-win game for most businesses.

Good business is always about building value, trust and relationships. It’s seldom just about price – although today many retailers and customers alike are being fooled into thinking that price is the primary factor.

Price becomes the issue when value is not communicated, understood or appreciated by the retailer and the customer.

And that leaves the door wide open for smart online retailers who know how to focus on building value, trust and relationships – and giving great prices too.



Strategies & Roadmap, The Big Picture
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