U.K. Shoppers Dismiss Bricks For Clicks

Retailers like Tesco find that unless they cater to the growing number of people who prefer to shop in cyberspace, they risk extinction.
Retailer Tesco, the United Kingdom's largest private sector employer, with 290,000 employees, has opened a fifth "dotcom store" facility to satisfy online orders.

Before you say "so what?" you need to know that the company is the third largest global retailer, after Walmart and France's Carrefour, and dominates overall U.K. retail sales. Also consider that the news comes on the heels of a brutal few weeks in U.K. retailing that's seen major names like music and games vendor HMV and the U.K. end of Blockbuster go into Chapter 11.

The context: the U.K.'s seemingly unending appetite for shopping in cyberspace. According to data from the U.K. communications sector regulator Ofcom, online shopping is more popular in the U.K. than in any other country in the world, with U.K. consumers now spending an average of $1,718 (£1,083) a year. (Number two: Australia at $1,335, or £842). Boston Consulting Group research also highlighted the importance of cyberspace to the country's economy, placing it first in the G20 group in terms of its contribution to national income. That same study says that if split out as a separate category, e-commerce would stand as a bigger industrial sector than education or even healthcare.

[ Security must play a major role in any e-commerce venture. See 4 Steps For Proactive Cybersecurity. ]

But what Brits love to do most, it seems, in these straightened times, is search the Web for bargains. The country's retailers saw this for themselves in the holidays, with data cruncher Experian reporting that on Boxing Day (December 26), 14 million hours were spent making more than 100 million visits to company Web pages, with online purchasing jumping 17% over the same day in 2011, a new record.

All this e-buying is great news for those brands who have become what we used to airily talk about in the dotcom era: true "bricks and clicks." For example, department store John Lewis says online sales now account for 25% of its business, with total sales up just under $1.09 billion (£685 million) in the five weeks leading up to December 25. John Lewis says online sales are growing as a factor in its business mix by more than 40% annually.

And Tesco seems to be another. The company had $1.09 billion (£65 billion) in sales for fiscal 2012 and is reputed to account for one in four pounds spent by British shoppers. It is now extending its reach into online, with this latest order processing center making it a powerful competitor even to e-commerce giants like Amazon (languishing under some local opprobrium for failing to pay local business taxes on admittedly highly profitable operations). The new Tesco site, in Crawley, West Sussex, will create yet more jobs -- some 700, such as new teams of personal shoppers, team managers, drivers and support personnel.

"This state of the art [facility] will increase our capacity in the area, enabling us to offer an excellent and convenient service to our customers," Barney Burgess, COO of the firm's grocery home shopping division, told the media Tuesday. "Dotcom is an increasingly important part of our service for customers [as] more and more customers are using their computers and smartphones to shop." (A Dutch company, Vanderlande Industries, acts as Tesco's outsourced partner for the maintenance and operations of the dotcom stores' warehouse automation technology.)

But as Tesco and John Lewis do well, a harsh Darwinian fight for survival on the rest of High St. (the U.K. version of the U.S. Main St.) seems to be proving pure bricks-and-mortar retailers just can't hack it any more in the U.K. shopping climate. HMV, for instance, despite owning prime shopping real estate and 229 stores, had to throw in the towel after its failure to build a convincing online service meant that, for many consumers, it had become a place to check out a CD or a movie, then buy it cheaper online from a competitor (including Tesco, which now has a formidable digital content operation of its own).

Some bemoan the death of High St. and gutted city centers, as many shop spaces either stand empty or become betting shops or low-cost value retail outlets instead. The collapse of HMV and 78-year-old camera chain Jessops are said to be just the beginning, with talk of 140 other companies also set to be forced out of business by their inability to deliver the lowest price in cyberspace -- not any kind of real-world experience.

If any country has taken cyber shopping to heart it's Britain. But its experience also shows what can happen to companies with the biggest profiles if they don't build convincing online stories, it seems.

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