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Think the High Street brands have been hit hard? E-commerce is next…

Estimated reading time: 6 minutes

BHS. ToysRUs. Maplin. House of Fraser. Marks & Sparks. My dear old grandmother would be turning in her grave to think these staples of every Great British high street across the land are shutting, cutting and closing. Not that she was a big Maplin shopper, but she loved the rest. However, even my dear old gran, who was also no expert on the private equity investment shennanigans behind some of these commercial sob stories, could have seen it coming.

Across the developed world, brick and mortar stores have been losing ground to online sales for years, and many more household names in the US, and Europe, have gone the way of ToysRUs’ Geoffrey the Giraffe. It’s hardly even news anymore. We expect it. There’s always been an innate tension between the offline world and the online world. When I started working in digital marketing, the bulk of my industry spent fortunes of their client’s money on newspaper ads, TV and radio. Not any more.

In fact, if you were to go and suggest spending a wad of a Brand’s cash on getting Gary Rhodes to do a live demo of your product in a shopping centre tour of the Midlands (I can recall Electrolux or someone doing something similar back in the mid-90s) they’d think you’d gone bananas… unless you were live streaming it on Facebook or YouTube of course.

However, what few people seem to realise, is this high street cull is being misrepresented in the media. We’re told in the news coverage, that brick and mortar can’t compete with online shopping. That’s only half the story, because each time we see a much loved store collapse, it’s always got an e-commerce division and its own online shopping options. Just look at what has happend to Tesco Direct!

The truth is, it’s nothing to do with online per se, it’s to do with two things – changing human behavior, and the rise of the digital marketplace.

Put simply, e-commerce isn’t what it used to be. Things have moved on. We’re shopping via apps these days, not Google. Well, not so much as we did. Over half of online sales, globally, happen in marketplaces like Amazon and eBay. That statistic is not a trick of bulk-buy plastic widgets or bargain basement stack-em-high sales skewing the averages, either. Over 45% of US households (and over 33% in the UK) are Amazon Prime subscribers. They’re high to middle income demographics, or in other words, quality prospects. House of Fraser prospects…

The marketplace model is booming. Retail Week research suggests 44% of e-retailers are developing a marketplace model, where they either ‘dropships’ (buys third party stock and fulfills via their own warehouse and delivery) or adopts a full-on Amazon model of taking sales via their front end and the third party fulfills the order themselves.

Developing a marketplace is a way to boost growth and consumer appeal in an era where retail growth remains slow. In today’s omnichannel world – where the customer might start shopping in a mobile app, or a website, or in a brick-and-mortar store, but complete their purchase later in a different channel – the aim is to leverage ‘marketplace intent’. The shopper comes in to buy one thing, then walks out with another. That’s how department stores and supermarkets work, at least, that’s how they were supposed to work.

The problem is, in the brick-and-mortar world, that kind of magical marketplace is limited by logistics, and even in the dropship world, you are limited by stock and warehousing… whereas in cyberspace, with a true marketplace model, you can be as wide and supply chain free as you like.

At the same time, while marketplaces are hotting-up and looking cost effective (in fact, just throw all your marketing budget at Amazon that seems to work for many SME brands) the sheer proliferation of e-commerce sites is – ironically – making it e-commerce less affordable. There’s a constant pressure to spend on systems, maintenance (e.g look at the latest Magento update!), supply chain management, deliveries and of course, search engine optimisation and paid search, social media to get traffic and make sales. Capital costs and competition are fierce in the e-commerce world.

And then, of course, what happens? A whole bunch of would-be customers browse a product on your store (or come and see it live in-store), then they go online and try to find it cheaper. Or get free delivery. Or find the colour that’s out of stock in your warehouse but available elsewhere. Or find discontinued models… or whatever, and so on. And they find that choice, convenience and low-friction shopping, through a digital marketplace. Not a dropshipper. A proper, full-fat Amazon or eBay offering.

The truth is, for the poor Geoffreys and Maplins of this world, their physical stores and their e-commerce shops were really useful for browsing products, but when it came to actually selling them? Nope. Christmas rush for that must have Power Rangers Zord? Out of stock at Toys’R’Us… in stock at a grossly inflated price on eBay, but hey, it’s Christmas and little Matty wants it sooo bad. Need a discontinued 3.5mm jack Toslink cable to connect your new smart TV optical audio to your 5-year-old home cinema system… ask the guy in Maplins, then get it delivered free next day with Prime. Sic transit High Street, sic transit e-commerce.

Which brings me back to my granny, because, once she discovered you could ask Alexa to buy wool and knitting needles, her Christmas jumper output went through the roof, which come to think of it, might of been what finished her off in the end. Sadly, the local craft store lost their biggest customer. They’ve got an e-commerce website too, but apparently, they do most of their sales through Etsy these days. No kidding…

If you need to get up to speed with the latest marketplace trends in retail, do read our blog on Marketplaceamp.com/blog

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