Clem Sunter

Two real game-changing flags

2013-01-10 14:27

Clem Sunter

Foxes always have one eye cocked on changes taking place in the business environment - and, boy, did a big flag rise the other day on a major change which is turning the retail sector upside down.

John Lewis, a major UK retail chain, announced that online Christmas sales in 2012 were 44% higher than the previous year. Now I know that online sales are still a relatively small proportion of overall retail turnover in most countries, but this result was sensational when Christmas sales for the whole of the UK were almost flat. Significantly, most major brand retail groups in the UK recorded online sales growth in double figures though I haven't heard of any others that rivalled John Lewis.

Here, in South Africa, I haven't seen any Christmas figures but I bet you we are experiencing the same phenomenon because we have the same reasons for converting to online shopping:

- it is more convenient for you as a customer and saves time;

- it is more cost-effective because you don't have to drive or take public transport to the shop and then pay for expensive parking; and

 - the actual price of the product you are purchasing online may well be cheaper than the identical product in a physical shop as the vendor is basically selling to you wholesale and is saving on the normal rental for retail space.

The only offset for the company selling you the product is that it pays the cost of delivering it to you. However, most online sellers (including online book marketers) have developed slick distribution systems. Yes, there are exceptions where people have had to wait an inordinate amount of time for delivery but as the online retail industry grows up, the problems will be ironed out.

Of course, retail foxes are already adapting to the new reality and John Lewis is leading the pack. In Australia, I went into a men's outfitters in Perth to check out some suits. The assistant sauntered over and said it would cost me 25 Australian dollars to try one on (that is R225). I said "you're kidding", and he replied: "I'm not. Most customers come in and try my suits on and buy the exact replica on the internet where you don't pay GST. So we've turned ourselves into a trying-on shop!"

The second game-changing flag fluttering in the wind came out of a conversation I had at a lunch in Somerset West. One of the guests who works as a reporter at a Cape newspaper described the significant cutbacks that have been made in the number of staff in newsrooms around the country. It means less specialisation and fewer reporters covering a greater variety of topics. Forensic investigation is almost becoming a thing of the past.

Online media sites like the one I'm writing on are playing havoc with the business models of the printed media since you can get your news for free on the internet. Moreover, you can comment on it as a reader immediately which you cannot do in a broadsheet or tabloid. Virtually every newspaper in the world is therefore putting as much effort into its online website as it is into the paper itself. Yet, the majority of them are still offering content for free on the internet. Hence, the pressure on newspaper staff complements caused by pressure on profit margins.

Retail property developers and newspaper proprietors have to be really foxy in coping with the two flags I have described. Basically they have to reinvent their product, the former by turning their malls into an entertainment space (for example you cannot eat at an online restaurant) and the latter by offering more sophisticated commentary and analysis on the news rather than just breaking the news itself. My advice to both of them: stay bright-eyed and bushy-tailed as the High Street will never be the same again.

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