THE IMPACT OF THE RISING ONLINE STORE ON HIGH STREET STORES

THE IMPACT OF THE RISING ONLINE STORE ON HIGH STREET STORES

 

Introduction

The U.K High street has played a major role as a barometer of the nation’s cultural and economic health. It is currently widely recognized that the internet power scope and its interactivity provide the retailers with the potential to transform costumer-shopping experience. The capacity of the internet to provide information, facilitate two way communication for consumers and its advanced marketing online strategies has proven to be an extremely flexible retail channel for most consumers (De Chernatony 2012). The internet provides consumers with a wider target market through improved consumer communication and the delivery of customized services. Therefore, majority of consumers have embraced these modern innovations. Therefore, online retail has grown considerably over the past 15 years, with increased growth in the future. Therefore, this paper discusses the emergence of internet retailing to present critical review of the impacts of rising online stores on the high street stores (Noble et al. 2009). Online stores threat to the high street stores The biggest threat to the traditional retailers is the e-commerce where the volumes of the volume of the online sales have begun to reach the critical mass. For example, in 2012, approximately 12.8% of the shoppers spent more on the internet, with approximately 20% of the retail transactions made online (Hu & Xie 2013). According to the Dan Wagner, the CEO of mPowa and the Powa technologies accountable for implementation of online mobile platforms believes that internet shopping is currently more popular in the U.K. The internet threats to the high street stores were perceived to come from the following sources: a) Termination of intermediary: online internet has made it possible for the manufacturers to target their consumers directly, removing the retailer as a middle person from the equation. Through online interaction with their consumers, the manufacturers have the chance to change the structures and dynamics of the retail channels (Soopramanien & Robertson 2007). However, some of the manufacturers did not embrace this strategy die for their lack of managerial and technical skills essential for selling the products directly to the end consumers. b) The use of virtual merchants as intermediary: the use of virtual merchant without the need for the establishment of high street presence has the potential to combine online commerce software with scheduling and distribution capabilities. The intermediary virtual, retailers do not use the traditional distributors, making it more economical for most industries. For this reason, the rising use of online shopping presents a threat to the highly developed and established retail stores in the U.K high street stores (Jones 2010). The lower cost channel structure resulting from elimination of distributors, bricks and mortar retailers and wholesalers has a high chance of rewarding the new intermediaries such as the virtual retailers with higher margins. Furthermore, the internet is more appealing to new entrants to the market who have not invested in a fixed location network. However, the competitive advantage of the new entrants strictly depends on the ability of the new entrants to gain head starts on incumbents and leverage strategies for long-term gains. c) The retailers cannibalizing their own custom: with the imminent threat of the online stores to the traditional retailers posed by the disintegration of the supply chain and virtual merchants, the retailers have no option but to develop presence in the web for their products (Wrigley & Dolega 2011). However, this strategy poses a significant threat to the high street, as the traditional retailers can cannibalize the existing offline operations. This is because in serving its consumers via two channels the retailer can inflate its cost base, which could have negative impacts on profit margins of the retailers. Radical online store’s transformation of the marketplace The evolution of e-commerce has led to a radical transformation of the market, leading to the evolution of new markets (Doherty & Ellis-Chadwick 2010). The electronic markets are currently practiced on one on one basis rather than the one to many basis. Therefore, due to the emergence of one on one marketing strategy, there is a need to capture a significant quantity of customer oriented needs. In this case, it is essential to develop products based on the customers’ preferences and needs. The evolution of online retail provides retailers with an enriched source individualized customer data, enabling them to take one on one marketing strategy. Currently, online retailing is close to 12.7%. However, food online sales are low with a margin of 3.7% (Doherty & Ellis-Chadwick 2010). However, this is expected to change quickly over the next five years. Following the increase in online shopping, major retail stores such as Tesco, Wickes, Asda are opening fewer larger stores. Other stores such as Marks and Spencer have a strategic plan aiming at stopping construction of the big outlets by 2016 (Nobel et al. 2009). Most of these stores are currently embracing the online consumers through online sale and marketing of their products and services. These chains adopt the use of eCommerce to stay viable in the competitive market. The most obvious core customers of internet shoppers are the young working class generation, and other consumers belonging to other professional classes. Demographic variables have played a critical role in online consumer behaviour (Twigg 2012). For example, previous research has identified that the consumer’s cultural and social makeup influences their online behaviours. One of the biggest shifts in internet usage is the introduction of smart phones. In the past 10 years, the number of mobile phone stores located in the high street has grown by 76% (Wirtz et al. 2010). As the online market matures, the online retail landscape has also changed significantly. For example, the high street retailers now account for over half of the online retail market in the UK. The future influences of internet retailing in high street stores Although it is not possible to predict the degree of how the internet will shape and design of the market, it is clear that the behaviors of the online shoppers are bound to change in the future. For instance, in the U.K, it is estimated that the number of online consumer shoppers constantly rise in the future (Doherty & Ellis-Chadwick 2010). The online retailing inevitably draws attention to its likely effects on the high street. Previous studies indicate that the long-term use of the internet has a significant impact on the online shoppers as the mainstream activity. In the future, the U.K retailers will either make clear strategic decisions permitting online retail to coexist with other retail channels. This coexistence of the multichannel world allows the bricks and mortar retailers to transform themselves to avoid mortally wounding the large minorities of the business categories. Some of the shops in some prosperous tourist attraction areas continue to do well. In addition, in future the brand is getting more important with the big companies continue to strive in the internet retailing. In the immediate future, the big companies continue to retain a strong position within the electronic market (Wood & Reynolds 2013). Moreover, with the increasing trend of consumers using the online channels to research for products, the use of multichannel approach is the most preferred style for the retailers. More Britain stores will close due to the increasing numbers of customers switch to current online shopping. The worst hit areas are the deprived areas such as Wales and North West, where current studies predict a closure of up to three out of 10 stores (Piercy & Alexander 2013). This transition will lead to 316,000 workers expected to lose their jobs in the high street Armageddon according to the study carried out by the Centre for Retail Research. Furthermore, from the independent retail analysis, the country needs close to 320 million pounds in the renovation program to build residential homes in the redundant shopping streets. In addition, this fund is essential for the conversion of disused outlet stores to construct doctor’s surgeries, nursery schools, offices and community leisure centres (Reddy & Pellegrini 2012). Conclusion The dawn of the internet revolution represents the most significant wave in the information revolution. From the constant growing trend of online retailing, it is arguable that the online shopping is moving rapidly to have high impacts on the traditional high street stores in the U.K and global. From the evidence presented in this paper, it is clear that most retailers need to develop strategies to respond to the increased consumer power in demand for online products. These companies need to enhance their marketing through social networking sites, differentiate their product offerings and ensure that their websites provide consumers with exquisite online shopping experiences. The retailers need to adopt the multichannel retail system to capture a wider market. This is because consumers can switch between online and offline retail channels when deciding on financial decision. It is essential to create a consistent multichannel experience rather than operating in the traditional offline stores. 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