Peter Cochrane's Blog: Online shopping spree

Written on BA296 flying Chicago to London Heathrow and dispatched to silicon.com from a London hotel with the wisdom to provide free wi-fi.

Just over 10 years ago I can remember contributing to the debate on the commercial web and what it would mean for retail. My views were always positive. It always seemed pretty obvious that we were laying the foundation for a new economy that would see new markets created. I also postulated that the transformation would be fast. What I hadn't reckoned on was just how fast!

Here we are fast approaching Christmas 2005, with the commercial web in its 11th year, and the impact on the high street is palpable. Everywhere I travel, town centres and shopping malls are busy but not so busy as in the past. Everything from books, music, videos, games, cloths, home appliances, electronics goods and food are being purchased online. And worse, this may be the last year that offline sales dominate. The numbers are staggering. In some countries and sectors online purchases are averaging around 47 per cent of the total.

In the UK a net result of this surge in online activity is a rash of early high street sales with up to 20 per cent off tag prices. Ouch! This is really going to hurt.

What has happened to cause this acceleration of online sales? Well, shopping has always been a bit of a pain but add the increasing number of traffic and parking restrictions, the rising price of gasoline and traffic congestion, and compound those with busier working lives and an increasing IT awareness, and bingo - there you have it! People are just taking the line of least resistance.

Specialist stores, really high-value designer goods and out-of-town shopping seem to be flourishing but the rest are on a downer. People in work and at home are busy buying online. So rapid has been the growth in the last year that those offering online food shopping and home delivery in the UK have hit full capacity as demand exceeds supply.

For the high street shopping scene I suspect that even worse is to come. Once people get a taste for online buying they tend not to go back to the old ways. And it seems to be beyond coincidence that the number of IT-capable people in society, as well as homes and offices with a PC online, has now also well-exceeded the 50 per cent mark in many countries.

Where will all this go? I think MP3 and the music industry is perhaps not too extreme an example. Imagine the impact of RFID on the used clothing market, for example. When the entire history of production, sale, ownership and use can be logged, then the exchange of clothing might migrate toward the CD, DVD, book and car model.

The big question for the high street stores is what are they going to do about all this? To my mind there are huge opportunities to be had but it means changing the business model and the service provided. But it starts with getting online, and providing in-store net access. The only way to get the attention of, and gain access to the new breed of customer, is to use the medium. Remember, the medium is the message, and the medium may well be clothing within the next decade!