Virtual high streets are yet another group taking a bite out of retailers’ margins
We all know the high street issues – low footfall (parking, weather, out of town, online, economic reasons), high rent and rates, pressure on other costs (utilities, salaries), lack of credit for seasonal buys, reducing margins due to increased shipping and raw materials costs… it’s not a great situation and independent retailers, all retailers in fact, seem to be working harder for less.
So my first issue with any virtual high street operator calling themselves the saviours of local independent retailers is the fact they charge 14% commission on sales… For some that makes it almost pointless selling the item in the first place.
But there are a list of other issues that I have which are far more of a concern and could massively erode the retailers’ ability to deliver on their customers’ service expectations or to meet their brand promises.
Why virtual high streets can damage your brand, impacting negatively on customer experience
I have a list… and in no particular order…
1. Delivery is next day or click and collect, in some cases it’s only available for restricted hours and in 2-hour windows, for some the cancellation terms are 3 days.
A. This isn’t really “instant gratification”, it doesn’t actually compete with the out of town retailers, supermarkets or online giants and it also imposes restrictions that if the retailer operated their own delivery they could better… For example SHUTL offer local-courier delivery services to any size of retailer, delivery can be as swift as in 15 minutes, but on average is 70 minutes, or, when you want it. No 2 hour windows, not next day… so certainly if you thought this was a good proposition because of the delivery, think again!
2. The refund process has not considered the customer experience at all – let’s face it, as a customer (in a multi-channel world) regardless of how I buy from a brand I expect that brand to be able to look after me, to handle my complaints, to provide me with a refund or exchange (if I am reasonably due one!) With the virtual high street a customer can’t get a refund at the store, it has to be processed online – there is a reason for that – the store didn’t “own the customer” (I’ll come onto that) and therefore the refund has to be processed by the “aggregator”. And what about exchanges? Partial refunds?
A. Customer experience is “but I bought this from you!” and yet transactionally that gets complicated. It is far better for a retailer to own the customer relationship and be in control of the process, ensuring that the brand experience at every touch point is how they want it to be…
3. The retailer doesn’t own the customer relationship, the aggregator does. They get all the data on spending habits, they take the money and pass it on. Now I’d be weary of this if I was a retailer who wanted to invest my energy in knowing my customer. I’d want to have the data about their transactions on my systems so I could analyse it myself, I’d want to operate my own loyalty scheme, aligned to what my ideal customer would best respond to.
A. One of the most important factors of being an independent retailer is being independent, having 100% control over how your brand experience is delivered and how your customers are engaged. Selling through aggregators can damage that and it can therefore reduce the quality of the service experience that you would otherwise deliver.
4. Virtual high street operators encourage retailers to redirect their own websites to the virtual high street BUT are not helping the retailer to build their own individual brand presence. They benefit from the traffic to their site from the sum of all the retailers’ customers, making their site more valuable, more commercial, more profitable and the retailers on the site begin to lose their own, individual online identity (which I would argue they need to build!)
A. A retailers’ own branded website is a key part of the customer journey and they need to recognise this, small and large! Customers who are able to engage with a brand through multiple channels typically spend 130% of what a customer who is only able to engage with a brand in a single channel would… But note… it’s about confidence in the brand, not about finding the brand in various other diluted forms!
5. The virtual high street needs the retailer to log in and manually update their inventory for in stock / out of stock… now I don’t know many retailers who have time for that… But if you forget and then the virtual high street sells your products you’ll have a customer failure on your hands if you are out of stock! This will damage both the retailer and the consumer trust in the whole of the virtual high street.
A. Again, when a retailer owns the customer journey they can ensure that both their processes and systems are aligned. A decent EPOS with an ecommerce add-on can provide a retailer with a real-time stock status, and it certainly isn’t something that only big players can afford – these days with cloud-based retail systems even a single store boutique can benefit from this quality of system and therefore support the customer experience by not failing on promises as a result of zero stock on hand from which to fulfil online orders.
What WILL save our high streets then, if it’s not “virtual high streets”?
Well it’s a lot of things and each high street has it’s own unique challenges, issues and opportunities driven by the unique mix of people who shop there, work there, socialise and live there.
Some places have developed too much space, in these areas it may be necessary to make alternative use of the property to breathe new life into what otherwise looks like a ghost town. Other places simply need to assess what the barriers are to shoppers, and remove them. Easier said than done, but councils, landlords and businesses are now recognising things need to be done differently to attract shoppers back. It could be parking, opening hours, or even that the retail offer is no longer aligned to what local people want. It is broken, so it’s time to fix it, but you can’t do that by applying a mask that looks like a successful global online retail giant and saying “look, we’re almost as good” because almost isn’t good enough!
My belief is that the high street MUST NOT become a poor imitation of Amazon. It needs to be what it is – a physical, community-based retail, service and leisure provision that is relevant and in tune with the needs and wants of the local community. People shop online and out of town for 2 main reasons – price and convenience. This kind of shopping is typically a chore, not a joy. We need to re-engage the disenchanted consumers, to remind them of the fantastic shops, restaurants, bars and places we have in towns. And guess what? Making it virtual will do the opposite! Whilst the retailers may get a few orders, especially with all the current hype, and because it is something new, if a virtual high street gives customer a reason to STAY AWAY then what about nail bars, tanning salons, hair dressers, cafes, tattoo shops – they will see footfall drop!
I hate to quote David Cameron, and it was such a corny phrase, but… “Beating heart of the community” was a good summary of what we need to rebuild our high streets back into. Love or hate the man, that statement has some resonance with me and with so very many of the local businesses I work with.
To save our towns we need to start by looking at customers. Not at businesses, not at infrastructure, but at customers. Who are they? What are their needs/wants? What would draw them back? What is keeping them away? And that’s not a one-size-fits-all approach either, this will differ in each and every community BUT when you build the picture of what the town needs to be, now and into the future, THEN you can make the right decisions to underpin the recovery. We have experienced a customer revolution, now we are going through a painful high street evolution. Let our towns shine, let them be what they are, places for people to be – to live, work, socialise, shop, party, play – because in an increasingly virtual world we need to have that real interaction with real people, it’s part of our basic human needs.
I could go on… but I think I made my point… What do you think?