PS Consultants - ideas & solutions

Retailing and the Internet

Consider the state of retailing in this country: ironically, the high street of this nation of shopkeepers has become a road stuffed with building societies, banks, estate agencies. The few retail premises that exist are now consolidated into a very few hands: M&S, Next, Boots, BHS etc., where the business of retailing has become the business of goods movement logistics. The new Malls (ugh!) rarely support many local business, because they simply can no longer compete with the economies of scale brought into play by the big chains.

Everything about retailing has become painfully more sophisticated. Simple cash registers - or even those delightful and doubtless "daring in their day" pneumatic tubes and aerial cableways - have been replaced by anything-but-simple "point of sale terminals" and cardnet swipe boxes. A swipe of your credit/debit card not only sucks the cash from your pocket, but produces a complete demographic profile for the retailer, courtesy of the credit card company. No specifics, of course, the data Protection Act sees to that, but the priceless intelligence available has been used to persuade many a reluctant retailers to start accepting plastic money, after years of stubborn resistance to paying the charge card company commissions.

Many of the old retailing skills still apply, but are being progressively transferred from the arts to the sciences, as psychologists analyse window dressing with hidden cameras to assess the eye movements of the window shoppers.

So how will the Internet - or its derivatives, because itís important to constantly remind ourselves that there is no such physical embodiment as "the Internet" - change this state of affairs? Letís consider the classic business "problems" facing the retail trade, and you will be able to work out for yourselves just why the Internet way of doing business is putting the wind up the entrenched interests.

1. Staff
Yes, you canít get Ďem, can you? Well, you can, but the social costs of employment are progressively more burdensome, and so the trade-off is between a number of inexperienced (low cost) youngsters or a few more mature and capable (more expensive) oldies.

Maybe times are changing, but the low enthusiasm and indifferent knowledge of shop staff lead to low expectations on the part of customers, who didnít expect to get much useful comment or assistance from shop assistants.

2. Premises
The rents have stopped going skywards, but the are still large enough, and relentless. Many commercial retailers are tied into onerous terms of leases that they cannot escape for maybe fifty years. Some really large operators that (wisely, it now seems) own and construct their own sites are in a position to horse trade with councils over the social benefits of their presence, the high street trader just gets stuffed.

3. Stock management
This is where the technology and the economies and statistical accuracy of scale have transformed the retailing business and turned it into a science. Jargon like "FMCG" (fast moving consumer goods) has inevitably accompanied this transformation of the business from the realm of the Arkwrightís corner shop, to the sharp suited "corporate speak" of the nineties.

4. Competition
A vendor needs to be able to charge enough to be able to provide a level of service that ensures repeat business, because repeat business is the lifeblood of any commercial organisation. But customers are fickle, and can switch allegiance very quickly if lured away by lower pricing.

The large retail grocers in the UK, having used their progressively larger buying power over the past twenty years to twist their arms of suppliers to cut their buying prices, have put most small retail shops out of business. All that remains are the "convenience stores" and now the petrol retail business has taken on that sector too.

The big food retailers are actually enjoying the biggest profit margins they have enjoyed for years, and all that despite having colossal overheads in the shape of prime-site stores and legions of staff. The consistency in pricing is approaching near-cartel proportions, and some cynics wonder if the various price-cutting promotions they appear to offer are the last vestiges of "window dressing" in this once noble trade.

But plainly the public are willing to pay for the level of presentation and service, since low cost warehouse operators have not yet bitten a notably large chunk from the hypermarket operators. Their relatively restricted range of goods is frequently cited as the turn-off, and brand-name suppliers, ever nervous of the supermaket operators, try to require that goods be sold in these "shopping clubs" and "cash and carry" operations provide goods in large units only, to avoid being frowned upon by supermarkets for permitting predatory competition on the average household shopping requirements.

The Internet way of retailing
Youíre way ahead of me. The Internet provides a better solution to all of the classic retail challenges. Some complain that it is impersonal, but after an average encounter in a retail outlet, most shoppers might not be too phased by this.

The Internet Shopping Network [INSHOPC.TIF] is one of the more visible operations, with a very slick bandwidth-hogging shopfront. So visible, that it was recently bought by the Home Shopping Network , in a move calculated to send shivers down the spine of the established retail chains watching those staff costs and overheads climbing through the roof.

Home Shopping Network is one of the increasingly successful satellite/cable shopping channels. It has the only thing that matters in the retail business of the future already in place: the logistics of handling the goods on their way from the point of origin to the point of consumption. Plus, of course the means to take the money...

Always think small
A recurring theme of the Internet is the temptation for us cybernauts to think "world-wide" when "village" is the more appropriate scale. Services offering world-wide delivery would seem to have everything on their side: global purchasing power, a single catalogue and administrative force. The in thing they donít have that is increasingly necessary in the modern world is the capacity to employ lots of people, who can thereby earn the money to purchase the goods.

I donít want to sound like an economics lecturer here, but the pace of the global communications revolution has overtaken the economic theories of the nineteenth century some while ago. Probably January 1st., 1900.

The current economic realignment brought about by multinational companies moving capital, resources and labour about at will is now joined by the fact that the individual has the power to do the same with their purchasing power. Sooner or later, thanks to the Internet, individuals too will be able to market and distribute their labour to the world market.

But letís just stick to the cyber village scale for the time being. If you choose to use your remarkable global communication capability to buy the cheapest, then you must expect your personal standard of living to head in the direction of those who produce the cheapest goods in the world.