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Comply or die – is the future bleak for high street retailers?

The past week or so has seen the first big retail casualties of 2013, with three long-established high street stores (HMV, Blockbuster and Jessops) going the same way as Comet did towards the end of 2012.

Even though I felt a tinge of sadness, having in past times been a pretty loyal customer of HMV, the only thing that surprised me is that they lasted this long with their business model as it was.

When I say I had been a loyal customer in past times, I’m talking about the distant past and I think that this is what the major problem is for these stores.

Years ago, people were a bit nervous about buying things online. If you listened to what the tabloid press said, you might as well re-mortgage your house and give your cash straight to the Russian Mafia as soon as enter your credit card details into your PC and attempt to buy something over the internet. But these days people are so much more web-savvy. Buying online is often cheaper and allows you to effectively browse the biggest shopping centre in the whole world without having to leave your house.

Now there are some things that I am very unlikely to buy online. Clothes are a prime example. I like to try things on, feel the actual material, see how the actual colour looks on me in “real life” rather than through pixels on a screen before I part with my hard-earned cash. Why would I want the hassle of sending something back if it isn’t exactly how I thought it would be? That would involve a trip to the post office which is either closed at the times I want to go or has ridiculously long queues at peak times (like my lunch hour) when I can go.

Would I feel differently if I didn’t work in the West End of London with access to about a thousand clothes shops within a half mile radius? Maybe a bit, but I doubt it would be enough to change my buying habits unless I was living in the middle of nowhere.

Unfortunately (for HMV) I don’t feel the need to have the same level of interaction when I buy a DVD or CD. In fact far fewer people buy CDs anymore when they can download an MP3 and save clutter. The times I went into HMV in recent years were after Christmas when I had a gift voucher to spend (thankfully not this year or I would have been livid) or if I wanted to look at what DVDs or Blu Rays were in the 2 for £15 promotion – and even on those occasions I had already looked on Amazon to see how much the same thing was there first. There might be the odd impulse buy or last minute Christmas present panic buy, but nothing on the scale of the hundreds of pounds I would spend there each year in the 90s.

Sadly, I think that more and more retailers will go the same way as those mentioned above over the coming year because they will find it difficult not only to generate sufficient new business, but also to keep hold of existing customers. Their overheads are likely to be significantly higher and as a result they will struggle to compete in a market where price dictates everything. Certain markets will be affected more than others. Electronics, technology, white goods, music and video are definitely within the highest risk group because you don’t really need to feel a personal connection when buying a lot of these items and you can almost always find a better deal online.

Obviously all of the larger companies have an online presence anyway, but they will have to be extremely smart about how they market themselves, drive traffic to their sites and above all compete with the prices of the likes of Amazon… maybe the first step to cutting costs is to avoid paying corporation tax.

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