Well, what do you want first, the good news or the bad news? I guess it is traditional to start with the good news, so we are pleased to announce that e-commerce is flourishing, albeit at the expense of conventional retail. This column is being written at the beginning of 2005, and the evidence we have seen during the run-up to Christmas shows that the high street suffered badly. The only way the big names could get people into their stores was to have special ’20 per cent off everything’ days from time to time. Meanwhile, other shops started their January sales in mid-December, and still they struggled. The shopping centres remained relatively empty and the car parks still had plenty of spaces available.
The Internet, on the other hand, boomed. Most online retailers were expecting a good Christmas, but they weren’t prepared for just how good this one was going to be. Ordering systems groaned under the strain, and postal companies had to lay on extra vans and staff to cope with the surge of Internet orders flowing through their systems. And many of those systems simply couldn’t cope. Lots of poor kiddies awoke on Christmas morning to find a message from Santa saying ‘your present is in the post’. Ho-ho-bloody-ho!
As you might expect, the shops got busier by the start of the January sales, but it was interesting to observe the shoppers in the large out-of-town shopping centres, who were crowding into shops and doing a lot of looking but little in the way of buying. Few were carrying the fistfuls of carrier bags we expect to see at this time of the year. As in the run-up to Christmas, the only items that seemed to be shifting from the shelves were those that were hugely discounted.
Looking after the pennies
This brings us to the bad news: nobody wants to pay retail any more; everyone wants a bargain. The high-street shopping patterns demonstrate this admirably, and it also explains the shift from the high street to the Internet, as there is no getting away from the fact that buying things on the Net is nearly always cheaper than traditional out-and-about shopping.
This means that people are at long last prepared to put up with all the negative factors associated with e-commerce in order to shop online. They are willing to forego the instant gratification that you get with a shop purchase and are prepared to wait a few days before they get to fondle the goods. They will put up with the fact that you cannot check the item before buying it, and accept the associated risks. Online shoppers are even willing to put up with that worst bugbear of e-commerce: the fact that your stuff is generally delivered at a time when there is nobody at home. You have to wonder how much time and fuel is being wasted every day as vans trundle round our cities simply delivering those ‘we called today…’ cards. People will now put up with all of these factors in order to save a few quid.
Actually, it is often more than just a few quid. Recently, for example, Paul bought a Sony LCD TV from an online store: it was £3,500 in the local electrical warehouses, but only £2,300 from one of the online stores. Similarly, a chest of drawers that was ‘reduced’ to £850 in the House of Fraser sale cost only £625 from an online seller. In fact, for some time now, Paul has made a rule that, at least for significant purchases, he simply will not pay retail prices. This Christmas has shown that many other people are following suit.
The high-street retailers aren’t stupid, though, and they have cottoned on to what is happening, so now many of them operate what is known in the trade as ‘differential pricing’ – you will often find that goods are substantially cheaper on their websites compared to their stores. Of course, this is only a short-term fix, and in the longer term they are simply helping to hammer the nails into their own coffins, as they slowly but surely convince consumers that their retail outlets offer poor value. But hang on, this all sounds like good news. We should be pleased that trade is moving from the high street onto our websites. So why did we say this was the bad news?
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