Does the High Street Have a Future in a Digital Age?

Can the move to e-commerce save the high street? or should we expect more downturn in the near future?

To answer this question we will first explore whether the current UK percentage of ad revenue invested in digital platforms could be an early indicator of a similar split pattern for physical and e-commerce sales over the next 5-10 years.

As of 2019, the data suggests that the sales split of e-commerce versus physical high street purchases are still in their infancy. Online sales grew by 15.3% in 2018, making up 18.2% of all retail spending.

Compare this to the more dominant level of ad spend we see in digital platforms (50.8%) versus traditional media (49.2%) for 2018. Digital revenue accounted for 18-20% of the total advertising market back in 2007, so can we expect to see this growth mirrored and online purchases reach 60% of all transactions over the next 5-10 years?

What is apparent is that, compared with other sectors that involve an online and offline sales split, having 81.8% generated through physical purchases is still exceptionally high.

This split is now rapidly changing as we see fewer physical stores and quicker, more cost-effective home deliveries leading many commentators to suggest that this will be the death knell for the traditional high street. The past two years (2018-2019) alone have seen a large number of well known retail stores closing or going into administration demonstrating the extent of the change on the high street.

E-commerce only operations with lower overheads have started to erode physical sales via high street brands and we have already seen major high street advertisers move towards digital platforms to promote and sell their products. For example, Next PLC has predicted a significant 50% increase in their digital ad spend for 2019 to compliment the number of products they now expect to sell online.

As the % towards online sales increase the more likely the advertising revenue will also increase to digital platforms, despite already being at 50%+. At this stage it is key for brands to still look at the options available to them through all advertising opportunities as 80% of customers are still carrying out physical buys and will be highly influenced by TV ads, press, radio, outdoor and cinema ads.

Analysis of some of the fastest-growing retailers in the UK from in house data has shown that 50% of the brands were online only and 50% had both a physical and online presence.

Across all these brands the common components for success were innovation and an understanding of the customer. The key take away message from the analysis was that:

Beyond consumer advertising businesses are also targeting customers by offering incentives to shop in-store. By way of examples, John Lewis offers free parking to their customers whilst Sports Direct offer a voucher for customers who shop online to use in-store.

A survey via BBC News asked some of the UK’s biggest retailers what percentage of online orders had been picked up in-store in 2018. The high percentage of online sales collected via “click & collect” is an indicator that the high street is still important to customers. The data below illustrates the opportunities that “click & collect” presents for high street brands in retaining physical visits.

Every advertiser needs to have full comprehension of both its product and target demographic. This in combination with the right media strategy and channel mix will ultimately lead to improved returns.

The problem we see, and this is certainly true in the advertising market, is that many brands panic and rather than looking at their own identity and end-user, follow the overall market trends and end up signing off ad budgets to platforms that are not transparent and do not provide clear ROI metrics.

Advertisers who understand this will find their strategy and ultimately be more successful.

Interested in this? Click here to See where advertisers by £M size sit in the UK Media Mix.

The move towards e-commerce “online sales” for retail is also having an inevitable impact on people employed on the high street. Figures released by the British Retail Consortium (BRC) reported that in the final three months of 2018, employees in the retail sector fell by 2.2% YOY (-70,000 fewer people employed on the High Street), total hours worked also fell by 2.8% and there were 1,267 store closures.

The loss of retail stores on the high street will have a knock-on effect on advertising revenue for media sales houses. The larger brands still tend to spend heavily on TV, press, radio, OOH & cinema and if they fail then their advertising spend will disappear, meaning the sales houses will be ever more reliant on the e-commerce companies to spend across traditional media. Longer-term this will potentially push the digital advertising spend levels to 70%+ as online businesses tend to use digital media to a higher degree than the more traditional high street retailers.

Evaluation of the high street and the advertising media mix shows a trend of retail advertisers seeking out experts in the media sector to provide advice on media strategy and advertising costs to remain competitive. Independent media auditing allows brands to gain a better understanding of how to target audiences and transform their strategies to deliver against a set of transparent metrics.

Need help aligning your brand to your target audience? Get started with our expert advisers today.