We all know that over the last few years the High Street has taken a battering with a combination of economic downturn and the rise of a new competitor marketplace online. However it would be wrong to look at this homogeneously as the High Street versus Online. Online retail sales have trebled in the past 6 years, however they still ‘only’ account for 11% of all retail sales. (see image from emarketer)
To understand why the high street is being impacted we need to look at sector-by-sector shopping figures to ascertain our purchasing behaviours and see which industries are most likely to be attractive to online shoppers.
Some of the biggest names to have gone into administration have come from the electrical, video & music or book sectors. It’s been estimated that over the last 12 months more than 800 major electrical chain stores have closed with the lion’s share of these coming from the Comet and Jessops closures. Furthermore Dixons and Argos are consolidating their survival as they look to close 162 stores and focus their resources on where the demand lies.
Closures of UK High street stores in the electrical, musical and book sectors:
- Zavvi – 125 stores – music
- Woolworths – 820 stores (once a major music retailer)
- Borders – 45 Stores – books and music
- Micro Anika – 7 stores – electronics
- Jessops – 193 stores – cameras
- HMV – 238 stores – music
- Comet – 236 stores – electronics
- Blockbuster – 528 stores – videos
- Best Buy – 8 stores – electronics
- Cecil Jacobs – 19 stores – cameras
It is therefore no surprise to see recent data from Verdict Retail that isolates the UK’s online spending patterns by sector. For some sectors, online sales have hardly made an impression at all on the high street, while for others, it looks like there is no turning back.
Electricals and music online boom meant High St bust
In 2003 5.5% of electrical purchases were made online, that figure has now risen to 43.3%, it is therefore no wonder that the High Street has taken a bettering in this particle sector. Furthermore with 81% of music and videos being bought online it is almost surprising that HMV and the others even lasted this long. In fact by 2017 the High Street’s share of music and video total sales is expected to be a paltry 2.3%.
Why are Health & Beauty online purchases so low?
Interestingly, only 5.5% of all Health and Beauty products are bought online. Is this because we prefer testing a product before we buy it? Or is the whole event of buying perfume, hand cream or dental floss so much more joyous to do in person? For example if you go to Boots or Selfridges and buy from the Clinique counter (as i have done many times), you are rewarded with a very nice shopping experience; your products are gift wrapped by a very pleasant Clinique employee. Plus you are given all the information about compatible products as well as current promotions. This type of service can not be easily replicated online.
The Amazon Effect
It seems no surprise that the major sectors that Amazon covers are also the sectors that have the highest share of online purchases and indeed the largest amount of high Street companies that have gone bust. So the combination of Amazon offering extreme cut prices alongside dubious taxation activity has seen this sector change considerably over the last five years. Amazon therefore have placed themselves in the ideal sector. They are able to manage their taxes in their distribution model while offering the types of products to consumers who don’t need to try them before buying them. However, with a recent move to increase their commission on reseller sales they may have become too greedy and in the next few months we shall see whether this price hike will trigger a mass exodus or whether, like many times before, they simply put up with this dominant simply put up with the price hikes.
Groceries sector set to Boom
With just 5.5% of all grocery shopping being done online, it looks like the supermarkets have still got a lot to do to convince us to do more home-delivery shopping. It is obviously part of our culture to do the weekly shop, to feel the fruit and veg in our hands and then cue for ages at the checkout. However, this sector is set to boom over the coming years. Forrester says that by 2017, shoppers across Europe will spend nearly €10 billion online for food and drink. With major superstores such as Morrisons not even having an e-commerce platform, it seems that the sector can do nothing but grow.