A bad week for retailers, or a good week for digital retailing?

It’s not been a great week for retailers. Look at Tesco – terrible; online sales grew by a whole 11%. And ailing DIY chain Homebase too – digital revenue up by 12%.

Of course, you might only have seen the headlines about Tesco’s profit decline and accounting errors, or Homebase shutting a quarter of its stores. As a result, you might not have heard that Homebase’s sister-company Argos saw online sales reach 43% of revenue; mobile sales increase by 45% in six months; or that 22% of sales now come through mobile or tablet devices.

Since the dot com boom of the late 1990s, we have heard much discussion about “bricks and clicks” – retailers looking to merge the best of the online and physical worlds. But even after all that talk, there are plenty still not getting it right.

If you look at two of the best performing high-street retail giants – Argos and John Lewis – what distinguishes them is a genuinely integrated multi-channel approach to their customers. Want to buy online and collect in store? You can do that. Want to buy something in the shop that is out of stock? Sure – here’s a tablet device to use, we’ll deliver to home for you.

Argos is even trialling digital concept stores – effectively, a physical store that sells digitally to customers who visit in person.

Tesco continues to be a leader and innovator in online retail – but perhaps underestimated the impact its digital success would have on austerity era shoppers unwilling or unable to afford premium products in store. Factor in aggressive low-cost competitors like Aldi and Lidl and you get the current problems.

Many retailers still see digital as something separate to their stores when their customers see them simply as different windows into their stock room. As happens in every sector, online was first seen as a threat – will the web replace the high street? Then it was seen as a complement – to save the high street, go online.

The truth is that technology does not simply replace or supersede anything – instead it fragments markets into many pieces, and eliminates barriers to entry. It demands an often radically different approach to customer engagement, not a bolt-on to old ways. Things change – and that’s hard for a lot of incumbents to deal with.

The main thing that is killing the high street is retailers’ reluctance to embrace digital and innovate their business models. The message from hard-up shoppers is clear – retailers need to go where their customers are.

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