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A lot of UK retail businesses, such as Comet, HMV, Jessops and Blockbuster, went into administration during the recent financial crisis. Some have been rescued, with parts of the chains remaining, but others have not and have been completely shut down. Part of the reason for this is down to the recession, with people not having as much money to spend, but a major factor that frequently combined with the recession is that they have lost out to online businesses.
Losing their trade to online retailers has also caused a backlash as they lost out to businesses like Amazon which pay very little UK tax on their UK sales, which caused the loss of a lot of UK tax revenue as businesses paying tax were replaced with those that don’t.
There have been additional warnings that traditional high street businesses will continue to lose out to web based retailers.
Currys/PC World, a retailer in the same market as Comet (electronics and white goods) has so far managed to keep going. One reason stated by their staff is that they provide extra value added services that Comet didn’t, such as product knowledge and tech support. Comet to a large extent sold using the pile it high and sell it cheap strategy, which will tend to lose out to those sellers with lower overheads such as online retailers who don’t have showrooms.
Even knowledge alone is not necessarily enough; an Australian business started charging a “browsing fee” for customers who visited the shop without buying anything, as people were coming in, picking the owner’s brains to find the best product, and then going away and buying that product cheaper online. This isn’t really a good solution though.
So, what sorts of offline businesses will be able to compete with online retailers? Well, here are some suggestions and thoughts on the subject.
Businesses such as restaurants and eating out, as well as services such as cleaners, and leisure activities like gyms, in all cases offer a product or service that cannot be fulfilled completely online. Certainly, you can order from take-aways as well as place reservations for restaurants online, but if you want to eat out, you need to visit the actual location. Unfortunately, restaurants in particular are a tough market to compete in. Sandwich shops and cafes are easier. Selling high value items is another area, as someone spending tens of thousands of pounds is likely to want to see what they’re buying first, and they’re less likely to then go away and buy it online than they are for an item costing a few hundred. Other services would include professions such as builders, gardeners and plumbers.
So, if you want an offline business, it will probably be best to be in a business that can’t be replaced by someone operating online, either because it’s a service, or because it simply cannot be completely done online.