by Jonty Sutton
Summer is here and there’s a sense of optimism following Britain’s coldest winter for years, both meteorologically and economically. Leaving the meteorological to one side, the long economic winter that has gripped Britain over the last couple of years has in fact coincided with a period of sustained and increased growth and innovation in the digital technology sector. Whilst reports from the BBC in February 2010 showed that in many of Britain’s towns and cities up to a fifth of shops are now standing empty, in the digital world, virtual retail spaces are opening every day.
However, whilst the recession may have speeded the demise of the traditional retail space on the high street, the heart of the retail sector had begun its transition from bricks and mortar to digital long before the recent economic downturn.
Without question, online presents a number of unique challenges for retailers; new and non-traditional retail brands have embraced the opportunity; creating new markets and capturing invaluable market share. As a result, there is a very real need for the traditional retailers to respond swiftly, ensuring that they not only recapture their market share, but build ecommerce platforms that allow them to fully realise the potential of the e-commerce sector. In simple terms, the challenge for the traditional brands is how to replicate and build on their offline experience in an online environment.
Indeed, a key characteristic of the new digital retail landscape is that it has become a level playing field for businesses. Thanks to unhindered technological growth and innovation, it has never been easier for the little guys to compete with the big guys. The board game Monopoly – a game essentially built around the value of real estate and location offers an interesting example. In the virtual space, the difference between having a hotel on Mayfair or Park Lane compared with Whitechapel or the Old Kent Road is determined not so much by fiscal might, but by digital strategy. For a hotel on Mayfair, in the real world, read prime spot on search engines in the online world.
Clearly, on the high street there is enormous value in having a prestigious real estate location. However it is important to recognise that the growing e-commerce market is eroding this traditional bricks and mortar value. A June 2009 report from emarketer* showed that despite the obvious impact the recession had on business to consumer e-commerce, the sector is set to grow by 6.9% in 2010 and by a further 11.2% in 2011. As those figures continue to rise, which they surely will, so the importance of a prime spot on the high street becomes less important.
That said, simply having a presence on the virtual high street is not enough; just as heritage brands invest enormous resource in ensuring their shop window is the best on the high street, so is the requirement there online. In fact, the requirement in the virtual world is even greater, given the increased competition the level playing field of ecommerce has created, and lack of advantage that location would traditionally provide on the high street. Undoubtedly, there is a very real battle in the virtual retail space between the traditional, heritage brands and the new kids on the block, where one side boasts a wealth of history, brand weight and marketing expertise, the other a passion and savvy for internet technology.
Building a virtual store boasts many similarities to building a store on the high street; simple rules apply: Is the shop window attractive and inviting? Are there suitable access points so you can maximise the number of customers entering the store? Are customers able to find what they are looking for quickly and easily? Is pricing competitive and appropriate? Are there enough tills and check-outs so customers can make swift purchases? Are efforts to up-sell being maximised? Is the brand prominent? The list goes on and on, but essentially the same rules apply virtually, as they would in the high street.
However, where the high street is limited, online offers a wealth of greater opportunity if you have the know-how. Whereas on the high street, the laws of physics apply and retailers are limited to an extent in how targeted they can be, in the online domain, retailers can be specific and targeted in not only reaching out to customers, but tailoring their offering precisely and accurately.
Traditional retailers may be experts in managing the customer experience in their stores, but in the relatively new world of digital, there is much to learn and it is a critical aspect in re-capturing or establishing market share. Indeed, the importance of customer experience and the ability to reach the right audience with the right message at the right time, cannot be overstated. With the right know-how and the correct digital strategy, online allows retailers to maximise opportunity and minimise wastage - and all with a measurable ROI.
The technology is there, the know-how is there and in the race to claim the most prestigious digital real estate, the battle is on. E-commerce may be simple in concept, but to really maximise the opportunities it presents, is a skill.
*Source – Emarketer: “Retail E-Commerce Forecast: Cautious Optimism” (US B2C E-Commerce Sales, by segment, 2008-2013).
Jonty Sutton is managing director of Redbox Digital, which has recently launched a specialist retail division Redbox Retail.