Fear of failure is destroying the high street © PA Images
Fear of failure is destroying the high street © PA Images

What should high street retailers do about the online threat?

21 January 2019

Who is killing the British high street? With pantomime season nearing its end, you have your pick of villains: Amazon, business rates, and unsympathetic landlords. The list goes on. 

Somehow though it seldom extends to the British consumer, who has surely done their bit by doing more than 20% of their shopping online. The list of solutions is shorter – “Tax Amazon!”, the tabloid mantra of the moment, will not in itself resolve the crisis – but some industry analysts believe that retailers can help themselves by changing their approach to purchasing technology.

Craig Summers, UK managing director of supply chain solutions provider Manhattan Associates, says: “Attempting to ‘become Amazon’ in two years is never going to work. Pure play competitors are too fast, too slick and too tech savvy. What high street retailers can do is leverage their advantage – their ability to offer a tangible personal experience – and quickly exploit relevant technology to deliver an outstanding in-store experience.”

As a supplier to the industry, this is exactly the kind of thing you would expect Summers to say. Wouldn’t every supplier like their customers to make their purchase sooner rather than later? Yet his diagnosis is not without merit.

Technologically, the gap between traditional retailers and disruptors such as Amazon is large – and growing. According to KPMG’s Global Consumer Executive Top of Mind survey 2018, platform businesses (as some pure play etailers are called) invest around 13% of their revenues in technology, compared to 5% for the consumer goods and retail sector as a whole. The same survey found that 66% of companies holding back on digital transformation said they were doing so because they had doubts about the likely return on investment.

Such findings are, Summers says, mirrored by his experience of the sector. “Too many traditional retailers are inherently scared of technology. They talk about agility and responsiveness but then spend two years assessing and developing a solution. At the speed with which technology is changing, there is a risk, by then, that the chosen solution is about to become obsolete.”

Traditional retailers are inhibited, Summers says, by legacy systems and legacy mindsets. As old and imperfect as a company’s existing IT system may be, staff have learned to live with it. In a volatile marketplace, with prices, costs and revenues under mounting pressure, there is an obvious temptation to spend less to bolt something on – such as a new online shopping site, or a new app – than invest in transforming the entire system.

In Summers’ view, this is a false economy for three reasons. First, in the age of cloud computing, companies don’t have to sign off on huge turnkey IT investments. They can move forward with a technological solution that is more flexible, adaptable and scaleable. Essentially, this new IT investment model is more akin to renting than buying.

Second, it doesn’t matter how slick or savvy your e-commerce site is if the rest of the organisation can’t keep up. “You can’t compete if it takes you 24 hours to deliver a price match offer when pure play disruptors can deliver the product in that time,” says the Manhattan Associates UK boss.

Third, he says, this “fear of failure – fear of making the making the wrong technology investment, or creating the wrong in-store experience, is destroying the high street.”

So what would he do if he were running a traditional retailer? In essence, he says, focus on the fact that having a physical store is a strength, not a weakness. “People still want to come to a store and be served. They want to interact with an enthusiastic and engaged individual, someone who knows the products, can share experiences and is able to locate any item anywhere in the supply chain in real time and get that item to the customer quickly, in any location. They want frictionless returns, slick click and collect and a smooth, quick checkout process. They also want to enjoy the experience. No one wants to travel into the high street to receive a bad version of what they can get online at home. They want something different – something better.”

Given the present pressures on traditional British retailers, he recognises that it’s a bit more complicated than that. Declining footfalls, rising car parking charges, soaring business rates, apprenticeship levies, long term leases on properties that may now be surplus to requirements, a playing field with etailers which, when it comes to taxation, is very far from level – these have all made life harder for the industry, as indeed has the ‘death of the high street’ narrative being played out in the media. The relentless tolling of jobs lost – without any attempt to point out that some sectors (nail salons, coffee shops, independent bookshops) are growing – isn’t exactly designed to calm jittery investors.

Yet traditional retailers can, Summers says, turn things around, by realising that, partly because of online technology, customer expectations have changed – and meeting these new expectations. To be fair, some retailers have recognised this already, acquiring or renting the expertise when they don’t have it. As Mary Portas, the retail consultant and one-time queen of the high street, told Management Today recently: “High street retail is not dead, it just needs to be reimagined.”

In Summers’ view, if traditional retailers want to be part of that reimagining, they need to make sure their technological investments deliver where it matters, by giving consumers a better in-store experience. “Stop viewing physical stores as your Achilles heel,” Summers says, “and think of them as golden eggs.”

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