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Will traditional retailing finally succumb to the e-commerce juggernaut this year?

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Will traditional retailing finally succumb to the e-commerce juggernaut this year? David Soskin confidently predicts that it will. So have you done all you can to keep up?

For many years, I’ve been a firm believer in the ‘media model’ for digital businesses – lean, high-margin, advertising-supported companies with no call centres, no deliveries and no payment issues. This is the model that underpins the success of Google and Craigslist among many. But now the time is ripe, too, for e-commerce. Of course, there have already been huge e-commerce success stories, such as Net-a-Porter and ASOS. But for many e-commerce websites, business has been an uphill struggle.

Thank goodness for my love of American Civil War history. For that is how I discovered e-commerce in general and Amazon in particular, long before it launched in the UK. Even back in 1996, I can recall the efficiency and the reliability of the service. For the first time I had access from my desk in London to a remarkably wide inventory of obscure books. It took Amazon seven years to be profitable.

Some 15 years later in late 2010, The Guardian reported that UK internet sales hit a record high, accounting for a staggering 10.5% of all retail sales in November last year, up from 7.9% in 2009. The Office of National Statistics estimated that around £660m was spent on internet retail sales each week during that month. In one vertical industry with which I’m familiar, supermarket shopping, UK online sales are growing at between 30% and 40% a year.

In stark contrast, HMV is closing 20 of its Waterstones stores, Borders UK collapsed a year ago, and British high street legend Woolworths is no more. This is the year of e-commerce, when consumers boosted by cheap, accessible broadband and smartphone accessibility make e-commerce a real winner. Meanwhile, the outlook is bleak for those businesses that have yet to fully embrace the internet, or with websites that fall short of consumer demands.

Daring to be different

Companies with original business models, such as Notonthehighstreet.com, which aggregates the produce of some 1,600 specialist retailers, are set for rapid growth. As one of its recent venture capital investors commented: “Notonthehighstreet.com is one of the most innovative and original e-commerce businesses to come out of the UK with the future capability to support thousands of small companies in Britain and abroad.”

Why is it that traditional businesses have found it so hard to embrace the digital world? Why Amazon not WHSmith? Why Ocado not Marks & Spencer food? Why Moonpig and not Clinton Cards? So far, very few good internet ideas have stemmed from major companies. Expedia was conceived at Microsoft, but how many other internet successes have been incubated in mega-corps? One reason for their poor performance is that big companies have a culture of ‘sticking to the knitting’ (and in the case of traditional media, this is somewhat surprising as the knitting is disappearing rather quickly). But another reason is that many who work in big companies have an inherent fear of failure, making them highly risk averse – not the optimal characteristic for developing a new internet idea.

Pushing boundaries

What’s more, to be successful online it is vital to have an outstanding product (preferably with original features), to innovate constantly and to be able to navigate effectively the ever-changing quicksand of internet marketing. These skills are few and far between in big company land.

Some traditional retailers, such as John Lewis and Tesco, now have sizeable and growing online operations. However, most still lag far behind, not understanding that the revolution is here to stay. Happily for smaller, more agile companies the opportunity is vast.