Internet takes on high street
Nigel Cope explains why the future of many retailers could be on the line
Saturday 22 April 1995
Tesco is launching a trial scheme next week to sell wine on Compuserve, an on-line system. Other retailers say they, too, are looking at how to take advantage of the burgeoning information superhighway.
According to John Hollis, of Andersen Consulting, the Internet could deliver a heavy blow to Britain's already beleaguered high streets.
"It could have a radical impact. If a store adds no value to the products and is not an enjoyable place to go, then customers will switch away. We estimate that 20 per cent of grocery sales could be removed from supermarkets over the next eight years.
"That would turn many into loss-makers and blow some smaller shops out of the water."
According to Mr Hollis, the retailers who stand to benefit most from the Internet are those with strong brand names which are trusted by their customers.
This means that the standard roll-call of Britain's biggest retailers such as Sainsbury, Tesco, Marks & Spencer, John Lewis and Boots stand to win. Secondary players may struggle.
Mr Hollis feels that smaller shops could survive by becoming collection points for goods or by specialising in niches overlooked by the big store groups. Ski clothing, for example - or lycra outfits for keen cyclists and aerobics enthusiasts.
So far, the Internet is very much in its infancy. There are an estimated 48 million Internet teminals worldwide of which about 4 million are in the UK. The system itself is fairly rudimentary. Sainsbury may be selling wine on the Internet but its other pages are simply information such as celebrity recipes, the company history and "interesting facts about Sainsbury".
Tesco's only other dabble with the superhighway is sending out its annual results on the system last week. Other pages on the Internet are equally disappointing. A property page listing estate agents' particulars yesterday listed only two properties in the entire country.
The Compuserve on-line system looks more advanced. Next month it launches a "Shopping Centre" service that includes wines from Tesco, books from WH Smith, flowers from Interflora, compact discs from Virgin and hi-fi and electrical goods from Dixons and PC World. The new service is an extension of an electronic mail system that the company has been operating in America for 10 years.
The big problem is payment. Sainsbury's Wine Direct Service cannot be completed using only the computer as hackers can access the system and copy customers' credit card numbers. Sainsbury's must phone customers back to get credit card details. Experts are currently working on the problem to develop a system that is secure.
But shoppers' attitudes may prove a larger stumbling block to Internet's retail possibilities. Many enjoy the social elements of shopping and like to touch and feel the goods they buy. The problems of QVC, the home shopping channel that lost £9.5m in the first nine months of last year, underlines the difficulty of "remote" shopping.
Deborah Grant, of Verdict Research, believes the Internet is more hype than a realistic challenge to retail patterns. Customers are slow to change their shopping habits, she says. "There is a lot of hype about it at the moment and we're going to see a lot of retailers spend a lot of money putting products on the Internet.
"But I doubt they'll cover their investment. It could turn out to be another 1992 and the Single European Market, a lot of fuss that turned into nothing. Let's remember, microfilm was supposed to signal the end of the book but it didn't."
Her opinion on Sainsbury's wine venture is equally damning. "If you are a wine buff you'll still go to your wine merchant. If you want a bottlefor dinner, are you going to go up to your bedroom to switch on your computer?"
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