The fear of online

With a background in journalism and magazine publishing, it is with understandable dismay that I have been reading about the slow but steady death of local newspapers in many countries. The pace of their demise, brought on by the collapse in advertising revenues as result of recession, has been alarming. In the US, advertising revenues declined by $11 billion in 2008 and circulation subscriptions fallen from 60 million to 51 million. The trend of course is torwards online which a growing number of people prefer to use to get their international, national and local information. Where this has really hit is at the margins of the industry and in this case that means the many, smaller newspapers.

Talking to a senior US retail and fashion journalist a few days ago, she also bemoaned this slow, steady decline in the newspaper industry and all that entails. But she also wondered what other parallels there may be for other business sectors that are vulnerable to the remorseless rise of online communications and commerce. And the one sector she mentioned more than any other is retail.

Could “bricks and mortar” retail follow the path of local newspapers? Its certainly a question to make you step back and think. There are definite elements that would make any retailer worry - from the shock of the big name retail collapses, to the fact that the sector remains over-spaced and with high operating costs. Added to that is the unavoidable fact that customers are online using faster broadband, interrogating many stores for their prices before buying and increasingly liking the idea of buying non-traditional online products such as apparel and footwear.  Figures published today in the UK by TNS show that online grocery shopping jumped 35% in the last 12 months to £2.9 billion and now accounting for 2.3% of the grocery market - up from 1.7%.

How should retailers respond to these underlying changes and to what extent should they take the threat seriously. Going “multi channel” is of course the right strategic response for most retailers, but then so has it been for newspapers and it hasn’t really helped them in the longer term.

What retail does have in its defence though which newspapers do not is that shopping for essentials is a must-do rather than a nice-to-do and for the majority of shopping “trips” this still has to be done via a store visit.  Shopping retains a social dynamic where people need and want to visit markets, malls or town centres to buy, eat and meet with friends and family. Stores, for both food and non-food, also have that opportunity to entice people through great merchandising, pricing, service and store design.

But none of these “defences” should be taken lightly and neither should the threat and the opportunity of the online channel. It will without doubt continue to radically overhaul and change the way everyone leads their lives.

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