by Tony Westbrook

High Street needs e-tail therapy

Apr 03, 20134 mins
IT LeadershipIT Strategy

The aftermath of the Christmas shopping season is now apparent, and confirms what we already could have guessed: That it has been a truly torrid time on the UK High Street.

HMV, Jessops, Comet and Blockbuster were among the high-profile casualties. Some gone for ever, some perhaps to reappear as shadows of their former selves.

Why the carnage? The economy has failed to restart again and is now in danger of dipping into recession for a third time. Alongside that, consumers’ buying habits are changing rapidly, and the widespread adoption of internet-connected mobile devices has accelerated that trend. Finally there is the shift to online purchasing that was already in train.

But each failure tells a slightly different story. Video rentals were doomed as soon as broadband got fast enough to deliver video unless they had a parallel online strategy to migrate users to. Blockbuster left it too late and now it’s gone.

HMV’s demise is slightly more complex. Music on the High Street looks like another no-hoper, but it turns out there is still a hard-core music audience which wants more contact than an online shopping basket can provide. The trouble was that HMV was too big to serve that specialist audience and was not geared up to do it in terms of staff expertise.

Jessops had a parallel online channel but could not compete online without compromising its shops. And the camera market has shrunk radically since camera phones matched compact cameras, making high-end products the only remaining option. Bringing photo printing services in-store was a desultory attempt to breathe life into a brand which now faces an uncertain future.

Finally, Comet had been struggling for some time under new ownership and finally toppled just before Christmas. But the white and brown goods segment was already oversupplied even before online pared margins further. This was a rationalisation waiting to happen.

Yet at the same time as these familiar names were each gasping their last, Amazon was recording record sales – up 22% worldwide on the previous December and netting a whopping £13 billion in Christmas takings.

It seems so easy to write a simple equation for a rise in online retail and the commensurate fall in High Street fortunes. But Jeff Bezos, founder and CEO of Amazon, suffered years of loss before this current success. And many of the same retail analysts who are now writing off the High Street were doing the same thing to Amazon’s embryonic business model a few years back.

Bezos knew better. His first letter to Amazon shareholders on going public in 1997 was a manifesto on the importance of planning for the long term. Shareholders remained twitchy for years and when Amazon did start seeing revenues, Bezos’ first instinct was to reinvest them in technology rather than cashing in or paying off debt.

Of course technology has been central to Amazon’s success, but there’s something else too. In retail IT the recent trend has been for efficiency and cost cutting as a way of compensating for the higher overheads of bricks and mortar, however, a few Google searches soon reveal that this is exactly the response companies like Comet and Blockbuster made. Look where it got them.

The other cornerstone of the Bezos obsession is that of customer experience through technology. Has High Street retail picked this up? If you visited a Comet or Jessops store in their twilight months, it’s likely you’ll reply with an emphatic no.

Most retailers have an online strategy that sits alongside their bricks and mortar one. But how well integrated are the two? The best retail experiences are those where you meet an expert who wants to share his or her knowledge with you. They might sell you a cheaper product because it suits you better now, but you’ll be back again when you need a more expensive one. The retailer wins the prize of higher lifetime customer value and market share.

Technology can play its part in this user experience by allowing you to collect and use the data you have about your customers to far better effect. The arrival of mobile-enabled customers could be a huge opportunity to collect far more information about the people that are both your online and offline customers.

So while efficiency and agility will always be an essential requirement in IT planning, they alone are not enough for a High Street retailer. Consider the customer experience, and like Bezos, put it at the top of your strategic planning. Hopefully you’ll avoid becoming part of next Christmas’s shopping statistics.