Retailers need the web to survive the credit crunch
As the credit crunch hammers the high street, retailers are under even more pressure to expand their trading channels or seek new avenues to boost growth.
The announcement that Marks & Spencer (M&S) reported a record decline in London trading – shares plunged by 5.3 per cent yesterday, the group’s worst performance on the stock market for three years and equivalent to a loss in value of £1bn – is probably sending a shiver down the spine of most high street retailers. But the news of poor performance doesn’t necessarily come as a surprise.
When reporting its Christmas results, M&S had already predicted 2008 would be a tough trading year, but also mentioned that web transactions were the only bright spot in the festive season, with sales up 78 per cent. M&S revamped its web site last year, targeting areas such as improved functionality, searching and navigation. It also invested in the expansion of online product lines such as clothing, accessories and jewellery, which is something that most of its peers have done or are in the process of doing, along with joining up processes related to key shopping channels – high street, online and catalogue/phone.
Last week, during a question and answer session taking place at the Retail Solutions conference in London, a member of M&S’s web team – after identifying himself, of course – asked David Walmsley, head of web selling at John Lewis, the following question: “How much are you spending in your multi-channel strategy?”
There was a moment of reflection there. Walmsley reiterated his points about the importance of introducing change along with innovative systems such as analytics, emphasis on customer service management and so on, finishing elegantly by saying something along the lines of “customer-facing systems must be a priority as they will get back to the ones who looked after them during tough times.”
Of course, he did not make the slightest mention of that investment figure. And he did not return the question to Mr M&S, though I’m sure he would have, if that event had been held today.
But I asked the question. The M&S web strategist did not mention a figure either, but was surprised that John Lewis did not return the question and said that multi-channel and web, increasing in-store offerings online and so on, has always been a focus and that investment in that part of the business had not changed “at all” as a consequence of the downturn.
So where did M&S get its strategy wrong? One of the areas where the retailer is suffering the most is clothing and accessories, where allegedly a great deal of effort has been put in during the web overhaul. But a quick browse on the web site shows they don’t have that pair of shoes I saw in store the other day, nor my preferred yoghurt brand.
It seems that offering a seamless multi-channel retailing experience and making the most of the web is the way to go, but conversely retailers are still struggling to reach that Amazon kind of nirvana that they want to achieve. It might be because web is still not seen by most businesses as a revenue booster (see the example of Primark), or web budgets are tight.
Apart from the obvious extension of channel choices for customers, ensuring functionality, product availability and understanding shopping patterns and experience is essential. Most retailers are only just beginning to grasp the significance of the multi-channel trading, but they will need to take their heads out of the sand and get up to speed with technology to support today’s well informed – and cash-strapped –customers if they want to survive.