To What Extent Does Internet Shopping Affect The Sales Of High Street Shopping?

1. INTRODUCTION

Online retailing has and is expected to have a massive impact on high street shops and stalls. This perception is based on the increasing sales from online distributors. In the UK, online sales recorded a monthly rise of 10.1 billion pounds while visits to high streets dropped by 2.9% (Office for National Statistics, 2013). As the popularity of internet shopping increases, high street stores are projected to face a huge loss.

The emergence of internet shopping affects high street shopping in a variety of ways. First, it is slowly driving middlemen out of business, a condition popularly known as disintermediation. The internet has facilitated manufacturers to interact directly with customers, helping them to target customers directly and avoid retailers. This has greatly changed the dynamic and structure of the retail channels. Since most operators of high street stores are retailers, the internet shopping is slowly driving them out of operation. (Centre for Retail Research, 2014) records a 161% increase in the number of vacant stores in the past five years and advices retailers to lower their property portfolios by about 40% if they have to remain competitive.

Another impact of internet shopping on high street sales is the emergence of virtual merchants. The internet has led to the emergence of new merchants who use software for electronic commerce, scheduling and distribution to bypass high street distributors. They have fundamentally changed the consumer products’ distribution channels (Earl & Mandeville, 2009).

Consumers also prefer shopping online because they dislike the high street experiences such as expensive parking, queuing, crowding and poor customer service (Smith, 2013). Online shopping provides them with the convenience of shopping from home, comparing offers of different sellers, paying through mobiles and getting the goods delivered.

1.1. Research questions

In evaluating the impacts of online shopping on high street shopping, the research answers the following questions:

i) How do the sales of online stores compare to those of high street stores over the past five years?

ii) What is the percentage of the population in the UK, by age and sex, who make internet purchases over the past five years?

iii) What is the number of retailers in London who have closed high street stores over the past five years?

2. LITERATURE REVIEW

The high street shopping has gradually declined since the onset of the twenty-first century, especially in Britain. Numerous theories have been developed to explain this development. (Dennis et al., 2009) Believes this trend is caused by the rise of the information age leading to rising in technology and more use of the internet. It has transformed the societal expectations, communication patterns and purchased behavior of individuals. People increasingly own smartphones, computers, tablets and the internet widening the access to information. (Doherty et al., 2009) explains that marketers have taken advantage of this trend to disseminate messages about availability of goods, their prices and other particulars through the internet.

According to (Constantinides et al.,2008) people spend most of their free time shopping among which 18 hours are spent walking around shops and 22 hours searching for the goods online. His study states on average, a person buys five pieces of items monthly, of which one is bought on high streets. The biggest influence on these sales is a long time spent on social media. Considering the increasing operation costs of operating retail stores such as the ever increasing rent and rates, most investors are switching online. (Sacco, 2014) States this to be the reason behind the decision of many investors to close down stores. The Arcadia brand announced through its owner, Sir Philip Green; it will close 10% of its 260 stores by the end of 2014.

According to (Burt, 2010), the internet enables consumers to access information of different stores and compares the products and their prices conveniently. (Centre for Retail Research, 2014) recorded a 161% increase of vacant stores in the past five years.

3. METHODOLOGY

The research used data from the Great Britain from primary and secondary sources. I made a survey in the city of London to observe whether there are empty stalls in the high streets. I also interviewed ten retailers of the high street stalls about the progress of the business in the past five years. I complemented this information by sources from the office of National Statistics in Britain, the center for retail research and the company watch. From the company watch, I extracted sales revenues from the best 50 high street stores and 50 online stores out of the 500 listed firms from 2008 to 2013. I then expressed the revenue as a percentage growth from the previous years and presented the information on line graphs.  National statistics data concerned the percentage of adults above 16 years in the city of London who purchased through the internet from 2008 to 2013. The data from the center of retail research shows the number of UK retailers who closed stores from 2008 to 2013. All the data is represented in line graphs.

4. DISCUSSION OF FINDINGS

The retailers of the high street shops explained that many of their counterparts have left the business over the past five years and pointed to the empty stalls in the vicinity. They also said that there were reduced visits to the stalls, which has forced them to reduce the stocks by almost 30%. They cited that the ones who are thriving search customers through their mobile phones and computers.

Comparison of sales between high street and internet stores

Year	Total retail sales (£bn)	Online sales (£bn)	% growth in online sales	High street sales (£bn)	% growth in high street sales
2013	302.7	29.0	13.73	281.8	1.66
2012	292.3	25.5	18.60	277.2	2.36
2011	285.2	21.5	19.44	270.8	11.35
2010	271.3	18.0	28.57	267.2	3.85
2009	261.9	14.0	55.56	257.3	1.74
2008	261.9	9.0		252.9
Five year growth	48.9	20.0	222.2	28.9	11.43

Source: Company Watch – 10th December 2013

The total retail sales for the 100 retail outlets under study increased progressively over the five years by a total of 48.9 pounds. This translates to 18.47% increase. The online sales also increased progressively over the five years, the highest percentage growth being in 2009. The increase in online sales for the five year period was 20 pounds, translating to 222.2%.  The high street increased by 28.9 pounds, translating to 11.43% increase. The sales of high street stores are still higher than online sales, but the online sales are increasing at a higher rate.

The line graph shows that the online sales increase at a higher rate than the high street sales. The high street sales show a reducing trend. The increase in the online sales is most likely caused by an increased use of internet enabled devices such as smartphones, tablets and personal computers shopping. The decrease high street sales are because of the switching of the purchasing behavior to online, hence producers sell directly to consumers, avoiding retailers.

Percentage internet purchasing by sex and age group

Year	2008	2009	2010	2011	2012	2013
Men	57	66	64	68	68	74
Women	49	57	60	63	67	70
Age group
16-24	65	78	74	77	79	86
25-34	72	82	79	88	87	92
35-44	68	75	78	79	84	83
45-54	59	65	70	73	72	77
55-64	45	52	58	59	61	67
65+	16	20	22	27	32	36
All	53	61	62	66	67	72

Source: Office for National Statistics, 2014.

The table shows that all age groups are increasing the use of the internet in shopping, the highest being 25-34. More than 50% of the people below 65 years do their shopping online, implying that less than 50% of the people below 65 years shop in the high streets. This trend has resulted to lesser visits to the high streets leading to the closure of some stores and reduction of property portfolios (Barnes, 2013).

Number of retailers in London closing stores

Year	2013	2012	2011	2010	2009
Companies closing stores	49	54	31	26	37

Source: Centre for Retail Research, 2014

The graph shows that the number of retailers closing shops reduced from 2009 to 2010 then increased progressively to 2013. The ability of internet to enable the producers to sell directly to the consumers and avoid retailers and the emergence of internet distributors has resulted to retailers reduced customer visits, hence, closure of stores (Strategies in the UK Retail Sector, 2013).

CONCLUSIONS

Internet shopping is cannibalizing on high street shopping in three ways: first, it has changed the dynamic and structure of the retail channels where the producers sell directly to consumers and avoid retailers, driving them out of the chain of distribution. Secondly, it has led to the emergence of new merchants who use software for electronic commerce, scheduling and distribution, bypassing high street distributors. Third, it has provided an avenue of convenient shopping, enabling consumers to avoid unfavorable high street experiences such as expensive parking, queuing, and crowding.

The research was centered in the UK and it recorded data between 2009 and 2013. It aimed at comparing the sales of online and high street retailers, finding out the percentage, by age and sex, who do online purchases and the number of retailers who have closed online stores.

The sources of data were both primary and secondary. The surveys indicated that there are many empty stalls in the city of London and the interviews indicated that high street retailers have reduced their stock by about 30% due to reduced customer visits. It also revealed that the retailers are using Omni-channels of distribution. The sales of high street sales are still higher but reducing while the online sales are increasing at a high rate. The average proportion of people doing online purchases is higher than 50%, by age and sex. The high street retailers closing shops over the past five years maintain an upward trend, showing how severe online shopping is affecting high street shopping.

Related essays