Clicks Instead of Bricks

Here, in our April issue and following on from the recent announcement that UK retail giant, John Lewis, is planning to cut almost 400 jobs, Sussex Business Times takes a look at the ongoing demand for clicks instead of bricks and how online retail can benefit a business

The relevance of high street retail has been questioned more and more over the past decade, with online gradually taking over the sales figures, and less and less consumers hitting the streets to purchase their goods.

Online sales in the UK have been steadily on the rise since at least 2007 with the value of internet sales as a proportion of total retail sales rising from 2.7% in January 2007 to 12.8% in January 2014. Namely due to the natural increase in online footfall over Christmas, in December 2014 £1.1 billion was spent online: the first time ever that more than £1 billion had been spent online in a single month.

UK retail sales made up a total of £358 billion in 2016 – 12% of those sales were made online, which is a 10% rise on the previous year. In 2008, online and mail-order businesses accounted for 3.4% of the total number of enterprises in the retail industry. By 2012, this had increased to 8.2% with over half of music and film sector sales made online rather than as a physical purchase. This has resulted in severe difficulties for retailers such as HMV, which went into administration in early 2012 and existing stores have more recently developed strategies to prevent their own decline. A retailer without an online presence is redundant in the eyes of the modern shopper with geographical expansion no longer the primary way that established retailers can extend brand reach and increase sales. Today, the internet enables retailers to do both with far less financial commitment, and the demand is certainly there.

According to last year’s Eurozone figures, 14 high-street stores are closing in the UK every day. The ongoing and steady closure of bricks-and-mortar stores is happening at the same time as 65% of internet users in Europe shop online. In particular, people aged between 16 and 74 are using the internet once a day at the very least. Figures released back in August last year revealed that overall non-food online sales increased by 11.2% in July in comparison to previous months. There’s been a clear correlation between older retailers struggling in the current industry, with many slowly declining as they fail to gain footing when it comes to digital sales – some of which, even without an online platform. Digital sales and having a high-end digital platform has become hugely important for retailers in recent years, with a reported 69% of 55 to 64 year olds purchasing goods online. Additionally, the amount of men shopping online has also increased by 25% back in 2008 to a whopping 77% in 2015, whilst amongst women, there was a 26% rise to 75%, showing the true extent of how the internet is relied upon in this day and age.

SBT recently received news that retail giant, John Lewis plans to cut nearly 400 jobs in its home fittings services and restaurants amid its own shift to online shopping. Affecting 32 out of its 48 stores in the UK, this move is after more than 40% of sales at John Lewis over Christmas were online. The pound collapsed in value against other major currencies after the Brexit vote – by up to 20% versus the dollar alone – making imported goods more expensive. This has left producers and retailers under pressure to pass those extra costs on, with consumer price inflation taking off before Christmas – although many stores held off on price rises ahead of the crucial festive season.

It’s estimated that around 773 staff could be affected by redundancy but would be able to apply for 386 new posts. Not only is this a shame for the 387 roles that will disappear almost overnight, but it’s also a sign of the changing times – is high street retail on the way out? Should independent retailers be looking to do the same?

John Lewis Operations Director, Dino Rocos said: “Our Partners are passionate about offering the very best customer service and these proposals will allow us to modernise our business as it adapts to the changing needs of our customers and the role that shops play in their lives. We understand that for some this will mean a period of change, and we are working with affected partners over the consultation period to give opportunities for redeployment in new roles wherever possible.”

January’s figures from this year do demonstrate the importance of online retail as a future driver of growth, with this online trend expected to continue throughout 2017 and beyond. Online channels allow retailers to offer more promotions, drive more sales and gain more customers at a far greater pace than they could in store. However, at the same time, figures show online retail sales growth to have slowed since this time last year (a 9.2% growth in January 2017 compared to 13.8% in 2016) with a multichannel offer seemingly the answer to retail success.

Waterstones, the UK’s leading bookshop chain, is on the defensive after going incognito at some of its newer stores. The firm has opened three shops that do not feature its distinctive branding, prompting accusations of deception. They are Southwold Books in Suffolk, The Rye Bookshop in East Sussex and Harpenden Books in Hertfordshire. But Waterstones’ chief executive, James Daunt, told the BBC the move was justified, saying he wanted the shops to have a more independent feel – a quality that evidently that attracts the masses.

Louisa Walters, founder of The Restaurant Club, a 17,000-strong membership scheme championing independent restaurants says: “It’s worrying that the shop fronts are designed to fool people into thinking they are locally run small businesses with the love and individuality which you find in local stores and eateries.

“We are seeing an increased appetite for a more personalised experience with many people actively choosing to spend their hard earned cash at independents over chains. Chains are responding by surreptitiously taking on the look and feel of local stores whilst still offering their core business pricing and service, which is somewhat deceptive and a threat to real independents.

“Independents stores, including British restaurants, already struggle to compete with the chains in terms of buying power so have to offer something niche or different. We are urging people to vote with their feet and visit – or research – independent businesses wherever possible. If we don’t support our high street we are in danger of having identical high streets with little choice or diversity.”