Online Retailers? If you can’t beat ‘em, join ‘em

After Tuesday’s blog about the collapse of HMV and the impact that internet retailers had on the high-street, yesterday saw the news of Blockbuster entering into administration. Times are tough for brick and mortar retailers and while many try and fail to build a strong e-commerce platform, even now there are some large organisations that are yet to create a presence on the internet. Seller Dynamics therefore asks if you can’t beat the internet traders, why not join them?

Christmas 2012 transpired to be anything but the season of joy for Morrisons as the supermarket started January with the announcement of a 2.5% decline in sales over the six week Christmas period in comparison to the previous year. Since this announcement, questions have been asked about Morrisons’ reluctance to engage in e-commerce considering that they are the UK’s fourth largest grocery retailer yet do have an online store unlike their main competitors – Tesco, Asda and Sainsburys.

While the world sat up and took notice of the huge impact that B2C e-commerce had on the retail industry over the Christmas season, it was somewhat surprising to hear that Morrisons was not one of the many companies who profited from selling via an online store. Although CEO Dalton Philips has stated that the majority of Morrisons customers are not interested in shopping online, having a minority who do spend online is better than more and more customers being lost to competitors that offer an entirely different shopping experience to that of Morrisons. Philips however has since hinted that the company may look towards developing the e-commerce side of their business as a result of the Christmas decline and the ever increasing numbers of UK consumers looking to the internet to make purchases.

The power brokers at Morrisons only need to look at last year to see why e-commerce is such an important area of retail. Online sales in the UK grew at a rate of 17.8% in 2012, the fastest e-commerce growth rate ever recorded. While Morrisons may be seen as late bloomers in comparison to Tesco who have operated an online store since 2000, Philips must move his company into this market before taking any more financial hits. While only approximately 5% of all grocery sales are made online, this still presents an opportunity for Morrisons and it is more likely than not that this figure will only increase in the coming years.

Whether or not Morrisons will definitely launch an online store is still undecided but from our perspective as an e-commerce specialist, we believe that the company most definitely has to move into e-commerce in order not to be swept behind by the ever growing tide they seem to be fighting against.

HMV – The day the music died

Music and entertainment retailer HMV has been plunged into administration after racking up debts of £176.1 million, making it yet another high street casualty to yield to the current economic climate. The grim news will have a profound impact on the 4,350 individuals employed by the company and for music fans around the UK who are bracing themselves for the loss of yet another iconic music outlet.

As Deloitte prepare to conduct the administration process, analysts are already questioning the impact that e-commerce has had on this high-street giant and how the change in the consumption of music has affected not only HMV but all retailers in this particular sector. Despite having an online store in addition to the 239 stores that HMV operate in the UK, the surge in digital music and video content sold mainly through Apple iTunes has been cited as the main reason for HMV’s gradual decline over the years. The company have already been downsizing for some time after selling its live entertainment arm and Waterstones book store. However, competing with digital downloads, online marketplaces and supermarkets selling the same goods at loss leader prices has proved to be too much with consumers now offered cheaper and easier ways of shopping for entertainment. No longer accepting gift vouchers from customers, (buyers can claim the money back from debit/credit card issuer using chargeback) Deloitte have stated their intention to keep all the HMV outlets open while seeking potential buyers

Famed for its association with the music industry, HMV is also renowned for being a DVD retailer although this area of the business has also come under threat from these same competitors not to mention the emergence of on demand broadcasting services. Lovefilm, Netflix, and Sky On Demand again offer consumers an instant product at a cheaper price than a hard copy, and once more undercuts HMV’s business model by giving consumers instant purchases at lower rates.

The face of entertainment consumption has changed and while this may be for the better in terms of technology, price and instant availability of music and films, it has come at a cost in terms of jobs and the layout of high streets and shopping centres. Whether this is the beginning of the end for large entertainment stores is yet to be seen although it is yet another indication of the importance of incorporating digital and e-commerce in a modern retail business plan.