So the received wisdom about Christmas is that it was an online one. Retailers with good online offers – or perhaps more accurately – compelling multi-channel approaches, did really well, and those without, well, did without,
Thus the march onwards to a virtual future gathered pace and the death knell of more stores and high streets grew louder – Jessops one day, who the next?
But before we all shut up (physical) shop, let’s pause.
In food it is claimed Morrisons did badly because it had no online presence. Yet, Waitrose and Aldi/Lidl did brilliantly because of their stores. There is also a question over the profitability of food online (in a pure sense); does it make money on its own terms or does it have to be seen as a loss-leader for the business – and if so is this sustainable? What is the true extent of the in-brand food/non-food cross-over?
In non-food the transition to online is somewhat simpler and the cost equations clearer. Internet is an always-on, real-time catalogue with souped-up information and delivery. Do it well and it’s obvious why it works – just think Next and the compelling nature of their offer on-line, through catalogue and in-store together.
And it’s this combination with stores that is so interesting, What percentage of the online sales was collected from a store? And what percentage of this was from an out of town store? Reserve and collect seems to be gaining apace, Is online as successful without such multi-channel approaches? For some retailers it seems not. So the growth in online may “simply” be a transfer of store sales to another channel.
And then there’s the question of like-for-like sales. This measure gets a lot of commentary in the press where it is favoured and usually with the rider “this strips out new store openings”. And this is true. But I still don’t like it.
Like-for-like also strips out store closures. And I wonder what happens for example if say Top Shop closes in a town? Are all these sales lost? Or are some transferred to the internet, mobile or tablet? How are they then recorded? Or do some physically go to the Top Shop in the next town or city? As store networks close , so some growth in like-for-like sales may likely be as a consequence of store closures. How much, who knows? And that’s without thinking of the competitive effects of store closures.
So let’s look at the figures with a cautionary eye. Perhaps not a Sainsbury eye on the Tesco figures, but perhaps an ever so slightly questioning one, and not only about the value of like-for like sales if you’ve bought them by slashing margin. Yes, as always there are winners and losers; the big questions have to be whether for some this is temporary or in the latter case terminal, and the reactions of the management to what they see in the detailed figures (was profit maintained or not is an interesting question for say Tesco and Marks and Spencer?).
Finally, and nationalistically or parochially depending on your view, we should point out that we can say nothing, so it seems, of whether Scottish internet sales differ from those elsewhere in the UK., We can speculate that they are higher proportionately than in England, but wonder whether this is right or not?
Increasingly I suspect some of our data sources may as a consequence of this structural shift in consumer behaviour and retailing, be less meaningful on retail sales trends. Sorting our a decent internet sales monitor for Scotland would seem like a good thing to come out of these figures. Here’s hoping!
Stirlingretail 
I continue to speculate that it’s the combination and the mix, and the management of offline and online that is the critical dimension. Hence my admiration for John Lewis.
Also relevant and intriguing (well to me anyway) is this posting from KPMG. The piece is headed ‘Three golden rules for multi-channel supply chains’. For me, however, the real nuggets are in the text leading up to the rules. These are steep, perhaps insurmountable, challenges for much of ‘traditional’ retail:
– Even away from areas such as music and books, “range authority” often lies with online operators. Online companies can pare prices to the bone, but they can also offer vast selections of goods that exceed even the best physical stores. [Note that ominous “Even away from areas such as music and books”]
– ” …the real push toward multi-channel is coming from Amazon,” says Kevin O’Marah, a Senior Research Fellow at Stanford Business School who specializes in the supply chain. “It is innovating rapidly in both fulfilment and demand capture. Its investments in distribution centers, packaging design and automation are pushing the rest of retail to follow.”
– Convenience, rather than price, often lies behind the attractiveness of multi-channel operations
[I’m not sure that that’s what I understood?]
– Infrastructure is the main reason retailers fail to make multi-channel a reality. Being genuinely multi-channel means investment in technology, logistics, marketing and people: the latter two are easy, but the former can be beyond existing companies with non-scalable CRM and ERP systems.
http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/ConsumerCurrents/Pages/three-golden-rules-multi-channel-supply-chains.aspx?utm_medium=social-media&utm_campaign=2012-cm-consumer-currents-27&utm_source=twitter&utm_content=multi-channel-supply-chain
The last of these is interesting. Certainly many people I talk to find online more convenient and I must admit that using the smartphone to shop for some things is so simple now it changes the balance of effort. For physical shops it really is a wake-up call about what they have to do to not be left behind. What is compelling for them – and for places?
Perhaps there are lessons in the history of retail-cum-others in the High Street? At a workshop this week an interesting aside was made about the rise of the once all-dominant Burton the Tailors with it’s both bespoke and ready-to-wear production lines – with a new level (for those days) of convenience and affordability). On the bespoke side it was (it seems) the highly affordable pricing of decent quality suits tailored to a consistent standard that was their USP. on ready-to wear, it was the attractive concept of being able to walk into a store, pick a suit ‘off the peck’ from a reasonably wide range – a then walk out of the store with the suit (and perhaps with the aid of HP). How did traditional tailors respond – perhaps they didn’t, and just died?) Equally, what were the lessons behind the subsequent decline of Burtons? Was it all just about the rise of outsourcing production to the ‘third world’; one phenomena that hit the UK High Street? My faulty time-gauge memory suggests that Burton’s decline preceded the acceleration of such outsourcing from the UK?
I think your memory about the time line is right, but not fully sure. Next obviously began to have an effect at this time with their new style catalogue (remember the swatches of cloth) and design orientation and changing consumer trends and mores also played their part here.
Interesting to think about someone like Charles Tyrwhitt or T.M.Lewin currently in this market.
Leigh
You raise an important point about Like for Like (LfL). Frequently cited and often used as a singular measure of trading performance unfortunately resulting in poor analysis. I have as you may be aware talked about a balanced set of trading performance measures and critiqued the different ways that retailers deal with the issue of sales cannibalisation and on-line plus a whole host of other variables that sometimes are in for some retailers and out for others when they calculate LfL.
Also the demise of the high street being due only to on-line as a headline is overstated given it still only represents about 11% (ONS figures) of total retail sales. The high street issues are complex and manifold and you have discussed them in the Scotland context a number of times.
You pose an interesting challenge about Scotland’s internet sales but how should we measure this in an increasing global (and without boundaries internet) world? If I live in Edinburgh and order a product on the tablet whilst on the train from London during a stop at Peterborough and it is for delivery to my brother in Dublin, is this a Scotland internet sale? Discuss.
Tarlok
The comparability across retailers is an issue in many things- but this lack of comparability also applies across jurisdictions, hence my point about Scotland. I don’t know how we can disentangle this in a digital age and when the place order, dispatch and delivery could be three very different things. But what it points to me is the need to make sure what we do compare is very clear and actually comparable.
I guess this did not arise in the age of catalogue retailing as the separation of places was not so clear – or was it?