net.wars: Becoming virtual
by Wendy M Grossman | posted on 07 April 2006
There are three reasons to visit a physical-world store over an online one: convenience; a chance to sample in person a wide range of goods; good customer service. All right, there's a fourth: it's fun. At least, number four on that list is the reasoning behind such phenomena as Niketown or those airport hangar-sized Levi's stores that try to look like night clubs (at least, I guess that's what they're trying for).
Dixons, which this week threw in the towel as a British High Street retailer in favour of turning itself into an Internet-only retailer, has been scoring pretty low on all of those for some time now. Convenient locations – if you work in town – it had. However, notorious for being staffed by young, ill-trained (particularly with respect to computer equipment) kids detailed to sell extended warranties, it was never going to win awards for customer service. The stores were too small to carry a really wide range of merchandise. They couldn't compete on price with the big, out-of-town stores (including the chain's own PC World or its electrical retailer, Currys, which is to be renamed the so-1999 "currys.digital"). And visiting one of those stores was certainly never fun.
I can't think of a direct US equivalent, in part because it's so long since most parts of the US have had comparable city centres. In Britain, where public transportation has kept city centres (mostly) alive by keeping foot traffic going past stores the "High Street" – the generic (and often specific) term for the main shopping drag in any given city, like Main Street in the US – has continued in its traditional role. Britain has some out-of-town malls and category killer stores, and it has many, many chains, but you can still find a local butcher or hardware store.
Pretty much all the headlines blamed the growth of ecommerce. Yet Dixons is being squeezed by all the factors above, not just the Web. And in fact, if they attempt to compete on the Web with their current high prices, it's hard to believe that its own brand name is going to be sufficient to make it a long-term success online. The same increasing competition that's squeezing the bricks-and-plastic Dixons – supermarkets like Tesco, which has expanded into electrical goods – are already firmly entrenched online. Sure, you can buy an MP3 player from Dixons. But without the real-world stores to advertise its existence like a painted van touring the streets, Dixons as an online brand name can't compete with Amazon, eBay, or Google's or Yahoo!'s shopping engines. And those are its main competition. Despite its ecommerce operation having grown by 50 percent year-on-year since 2002, does Dixons itself command the kind of loyalty that will get its less Net-savvy shoppers to follow it online? It seems hard to believe.
Among the non-Neterate of my acquaintance, I note that when they want to buy something confusing, like a computer, they do want to buy from a company they've heard of – but they typically want that company to be in the physical world, where they can go see what they're buying.
The Web's habit of reducing such purchases to a list of features and specifications works well only if you are experienced and knowledgeable. Of course, we know there's nothing to see when you look at a computer that tells you anything valuable other than whether you like the keyboard, but the presence of a human to explain things and promise to fix them if anything goes wrong is infinitely reassuring. Even if that human is completely ignorant, barely out of school, and gives the wrong advice. I may react in horror when one of these folks goes to PC World instead of the much nearer and more helpful local computer shop, but they do it because they've heard of it and they think that fact offers some security in unfamiliar blocked drains.
It's mildly amusing to look back about eight years and remember that at the time everyone was predicting that the big offline retailers would come online and stomp all over the cyberupstarts. And then again to about five years ago, when everyone was saying that "clicks and mortar" was the way to success. Instead, what seems to be happening is that retail, like so many other things in life and business, is becoming increasingly polarized between the huge names and the niche players. You're the local café or you're Starbucks. You're Cybercandy or you're Tesco. Increasingly, the middle is squeezed out.
Meanwhile, branding is supposed to be the answer for everything. Sometimes – for example, Interfauna – it is the shop's brand that matters. But more often these days, especially in consumer electrical goods, it's the brand of the goods you are buying.
No one buys anything from Wal-Mart because the name "Wal-Mart" conveys quality; the one quality that name conveys is "cheap". You choose Wal-Mart as the retailer because of the price, and you choose the brand of the merchandise for its design, functionality, quality, style, or perceived value. Retailer branding is comparatively fragile, even something as apparently unassailable as Amazon.com.
The most likely is that Dixons is a dying brand, and its Web operation will eventually be folded into a single operation that ecompasses currys.digital and PC World. And then Tesco or Wal-Mart will buy it.
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Wendy M. Grossman’s Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, follow on Twitter or send email to netwars(at) skeptic.demon.co.uk (but please turn off HTML).
net.wars: Becoming virtual