Is Online Shopping Killing the High Street?

COMMENTARY

The digital age has fundamentally altered consumer behaviour and attitudes towards the selling process, and it is still reshaping the high street.

The lockdown has accelerated this shift, with online shopping volumes increasing sharply. This trend is expected to continue, raising questions about the future of retail stores.

Over the last year, 89% of UK residents preferred to shop online. Clothing sells more than any other product. This is true in general, but it is especially true among young adults. A staggering 91% of people aged 25 to 34 shop online. Furthermore, it is critical to emphasise the role that e-commerce plays in shaping the retail environment today. 

The extensive online shopping sector is an integral part of the UK population’s daily routine; the country continues to be Europe’s most profitable e-commerce market. In 2022, online sales accounted for 26.5% of total retail activity in the United Kingdom. While the percentage may fluctuate, e-commerce revenue in the United Kingdom will only increase in the coming years, with all segments on the rise indicating a long-term development in the retail industry.

Although the statistics on high street decline may seem convincing, the relationship between online shopping and physical retail stores is complex. This blog will attempt to examine the current retail trends and retail situation and address the query: is online shopping killing the high street?

Clicks over bricks: tracing the rise of online shopping

The discussion about the increasing popularity of online shopping is closely connected to the steps in the development of the Internet from its early days to the emergence of an e-commerce giant like Amazon. However, the phenomenon is not limited to the technological aspect: the last three decades have marked a journey of significant changes in consumers’ behaviour and tendencies.

In this regard, Internet retail sales represent a unique and versatile indicator of those alterations, oscillating in sharp ups and downs that are often a mirror image of major social changes. To understand online shopping future trends and the impact on high street retail we should examine the past few years.

High street online shopping trends 

According to Statista, from January 2018 until early 2020, internet retail sales didn’t change much from January 2018 until early 2020, with values hovering around the same level (0%). This shows relatively stable growth however, in early 2020, there was an astounding increase in online shopping of as much as 100% in the volume of Internet retail sales. This spike can be attributed to the outbreak of the COVID-19 pandemic and the introduction of lockdowns. This development proved the significance of online shopping platforms as enablers of access to basic goods and services during a global crisis.

After hitting a peak 100% increase, online retail sales fell back, close to 0% by late 2020 with some ups and downs. From 2022 onward, changes stabilised with a slight overall upward trend through mid-2023. This shows that, although the trend of internet retail sales has stabilised over the next few years, the general direction is obvious. Overall, the trend is up.

With nearly 60 million e-commerce users expected by 2023, accounting for the majority of the population, online shopping has become the norm. Online sales in the retail sector accounted for 26.5% of total retail sales in 2022, more than doubling the amount from a decade ago. Despite a slight decrease in e-commerce retail sales value in 2022, the trend is expected to continue upward across all segments, particularly in the fashion industry, which is forecast to lead in revenue by 2027.

The growing significance of digital commerce in the modern world explains the gradual increase. Online presence isn’t a “set in stone” area in retail; it successfully adapts to changing consumer demands and wishes. Given the rapid evolution of the digital space, this dimension of retail will continue to dominate the way consumers behave with goods and purchase them in the future.

How has online shopping affected the high street?

When people start buying things online, it has a multifaceted impact on brick-and-mortar stores, creating patterns in the business world that go beyond simple numbers. The industry structure is not as eager to return to its previous state, as is evident from the widespread job losses and closed stores.

The toll on high street businesses

Some of the most well-known brands have been impacted by the economic pressures, including Ted Baker, The Body Shop, and New Look. The tidal wave of shifting consumer habits and the relentless pull of the internet have been particularly devastating to the fashion retail industry. Online shopping has majorly negatively affected traditional brick-and-mortar stores, as is evident in the statistics revealing the fast-rising percentage of retail sales from online channels.

More than one in every four retail sales from textile, clothing, and footwear stores are made from online channels. This has caused problems for traditional high street retailers, which has resulted in closures and job losses due to the new consumers’ shopping habits.

High street retailers adapting to the digital age

Beyond the obvious impact on sales and job losses, online shopping has had a broader effect on physical stores. The rise of online stores and the demand for a seamless customer experience across all channels are compelling retailers to undergo strategic transformations.

Some of these operational challenges include adapting the role of HR in the retail digital transformation, as well as many others, as a result of the digital transformation phenomenon. This process involves much more than just having an online presence or using new software; it affects how they manage their employees and handle their inventory.

In short, this is how retailers keep up with HR trends in the retail industry and changing consumer demands. Multichannel and omnichannel retailing approaches, as well as various reward programmes, are all part of the standard work, and the customer is not aware of the numerous logistical and operational benefits.

Finally, to compete with online retailers and deliver greater value to consumers, high street regeneration initiatives are literally reimagining urban life, bringing restored trade centres back to prominence. High street restoration projects are reimagining the social network in its most traditional form for businesses by creating consumer-oriented urban environments in which outdoor shop linkages are the key to the unseen. Creativity and innovation breathe new life into high-street stores by revealing their intrinsic relationship with digital first shops and the unique social networks they form.

The challenges and downsides of online shopping

While there are some undeniable advantages, online shopping also presents potential pitfalls for both retailers and consumers, which could potentially slow down the growing trends in the coming years.

• Environmental Issues. For starters, it is delivery logistics and associated environmental issues created by packaging waste and carbon vehicle emissions. These factors interfere with the convenience of the online shopping experience and hamper the operational process for the existing e-commerce platforms.
• Customer Experience Challenges and Return Policies. Online buyers face challenges with return policies and other customer service issues. While shopping online, a customer may encounter problems with the fulfilment process. Some customers dislike the return process because of the time and cost involved in shipping back packages or fulfilling other obligations. Moreover, a lack of customer support in the form of chat or phone calls can damage a reputation. A slow response from the company, or unrealistic expectations that consumers have in regards to software bug fixes, will undoubtedly erode the relationship with the customer.
• Lack of Physical Interaction with Products. However, a big problem faced by retailers nowadays is the lack of the opportunity of physical interaction with products. Although innovative technologies such as AR and virtual try-on are trying to solve this issue, a lot of clients still struggle with the comprehension of real colours, fabric, quality, and fit of products before buying them. This is especially crucial for fashion and beauty spheres, where touchable experiences have always been of a vital importance for the final choice.
• Cybersecurity Concerns. There is a growing concern over cybersecurity in the digital market space that puts both retailers and buyers at risk of data privacy violations and online fraud. The fear of identity theft or financial fraud or the misuse of personal information have made it critical to adopt stringent cybersecurity protocols as per the prevailing data protection acts.
• Logistical Challenges. Retailers face an ongoing and constant operational issue: the logistical challenges associated with a high volume of returns. Sophisticated inventory systems and reverse logistics capabilities are required for the efficient processing, restocking, and final negotiation of returned goods. Failure to respond effectively can result in inventory obsolescence, higher costs, and lower profits.

In order to address these issues and ensure that it is possible to successfully navigate online commerce, it is essential for retailers to adopt a risk management and development approach. Thus, to reduce existing risks and make the process more convenient for all parties involved, it is appropriate to consider speeding up delivery processes, improving customer support quality, using AR and virtual try-on technologies, and implementing proper cybersecurity.

Final thoughts: is online shopping killing the high street? 

It is beyond doubt that online shopping re-formats retail as we know it, yet, as described above, it is not the only factor that has determined the fate of the majority of high street shops. Socioeconomic aspects and gaps, as well as changing shopping patterns, play a role in the relationship between digital and physical stores.

The high street does not die out primarily because of the increased e-commerce; rather, it is an entire set of socioeconomic and future technologies in store retailing phenomena that cannot be generalised.

As we continue our journey through the changing retail environment, it is clear that retailers need to explore multiple solutions to adaptation and innovation. They should try to leverage both the benefits and challenges of online shopping to their strategic advantage.

Use technology to improve retail customer experience through digital transformation, increase the efficiency of their operations, and make them more successful. There has never been a more ideal time for a symbiosis of online shopping and physical shopping to bring customers the omnichannel experience best suited to their lifestyles and preferences.

Be future-ready, don’t miss our retail event ‘The Future of the High Street’ on the 5th of June 2024. This an invaluable opportunity to gain insights from industry experts on overcoming imminent retail challenges, embracing new technologies, and understanding shifting consumer behaviours for success. Register today.