Literature review

For a long time, high street retailing has flourished in the U.K and other Commonwealth countries. However, the increasing popularity of e-commerce is threatening to push away consumers of high street brands. This is because e-commerce provides more convenience and accessibility. Greenland and Newman (2015, p.52) describe high street retailing as those retail activities that take place in the traditional shopping spaces of a town, city or any other urban location. Gardner and Sheppard (2012, p. 143) point out that a series of changes are taking place in many high street retailing destinations including the U.K and the U.S. Some of the changes they mention include trends towards concentration, a shift towards specialization as well as a move by major brands towards increased market share. The changes have had a significant impact on local and independent traders, with Gardner and Sheppard (2012, p.143) stating that most of them are facing an uphill task when it comes to finding a prime site for business and reliable customers

Traditionally, the high street is known for its diversity and the good mix of goods and services it offers. However, the past few years have seen the disappearance of independent players from the high street in most economies around the world, a fact that has made it impossible for most shopping areas to differentiate themselves from emerging shopping areas within the same geographic region. Gardner and Sheppard (2012, p.143) point out that most town centres around the world are increasingly multiple looks and that this trend is likely to increase in the coming years. Pradhan (2009, p.185) discusses the practice of high street retailing in India. He opines that high street locations in India are characterized by a fair share of challenges, including poor parking availability, inadequate maintenance of common areas and encumbrances on property. Pradhan opines that poor town planning has resulted in unplanned marketplaces characterized by a lack of parking spaces as well as a disorganized mix of shops. He is of the view that despite these challenges and issues, the significance of the high street in India is unlikely to diminish any time soon. Pradhan (2009, p.185) states that high street retailers are increasingly realigning their strategies in response to the changes in the market and the prevailing conditions, a fact expected to contribute to the flourishing of the Indian high street in the coming years.

Kilby (2013) also opines that retailing has undergone significant changes, with the main driver being the changing consumer tastes and preferences. According to Kilby, the changes that have taken place have largely involved retailers reinventing themselves. Focusing on the retail environment in the UK, Kilby (2013) opines that retail development has slowed down due to the difficulties in securing development funds. Kilby further states that modern retailers are demanding shop spaces quite different from the traditional spaces. Consequently, this that has led to a significant portion of the high street shopping centre owners to consider refurbishing or extending their retail property. Kilby also states that the changes in the manner developers and landlords manage property have also had a significant impact on the U.K high street retailing. The profitability of high street retailers is directly affected by the lease rental rates as well as other costs meant for maintenance of the property and common areas (Pradhan 2009, p.185).

Carmona (2015, p.1) carried out an investigation of the potential, problems as well as complexities of the London high streets. He reports that the high streets in London can be best described as mixed high street corridors. He holds the view that the high street corridors are one of the most complex city structures given the diverse activities as well as goods and services offered. According to Carmona (2015, p. 1), the London high street has diverse dimensions, including real estate, physical fabric, exchange and movement. Besides supporting many retail activities, the high street is also an important creator of employment opportunity. Despite having a huge growth and strategic potential, the available policies do not adequately address the issues inherent in the high street and high street retailing (Carmona 2015, p.8). Bacon (2016) also reports on the new challenges facing the high street in the UK. Quoting a recent survey, Bacon opines that about 45% of consumers are of the view that parking is not improving while 30% opine that queues at different shopping outlets in the U.K high streets are getting longer. According to Bacon (2016), these convenience factors are making most consumers to opt for online channels. However, he is quick to point out that high street retailers can salvage their businesses by investing in customer experiences.

Live & Breath (2016), a U.K marketing agency, reports that in 2015, approximately a third of the individuals who took part its survey did the least shopping on the high street. The marketing agency posits that many consumers are opting for alternative shopping channels due to more convenient services offered by non-high street retailers such as same day delivery and click and collect. Live & Breath (2016) further state that despite the changing consumer preferences, many retailers have not been quick enough to adapt their businesses to the changes. Besides developing new store formats, high street retailers also have to consider investing in better service experiences (Live & Breath, 2016). With more consumers shifting towards digital shopping, the role of high street retailing is also changing. Many consumers are now utilizing the high street as a basis for comparison shopping. Besides that, the high street has also played a significant role in the emergence of a multichannel shopping environment. This is a clear indicator that the presence of the high street, even in the current competitive environment is very important.

In their report, Understanding High Street Performance, GENECON LLP and Partners (2011) report that the high street plays an important role in driving local economic performance. However, they report that researchers are yet to understand fully the economic value that the high street presents. The report acknowledges the fact that the high street is experiencing significant levels of changes with key drivers, including demographic factors, externalities, and market and competitive factors as well as physical and spatial factors. Rovnick (2015) opines that despite facing increased competition from online retailers, tradition high street leaders have found ways of extending their influence into the online market. He gives an example of the U.K companies such as Debenhams, Dixons Carphone and John Lewis, which have been able to offer both online purchases and in-store purchases to their customers.

Thomas, Bromley and Tallon (2006, p.43) investigate the role of retail parks as the emerging “High streets” in suburbs. They point out that since their emergence, retail parks around the world have grown regarding scale, number and even the extent of retail specialization. Thomas, Bromley and Tallon (2006, p.43) report that while some retail parks focus on offering bulk good shopping, others have embraced the traditional “high street” functions, making it possible for consumers in suburbs to access goods and services very similar to those offered by the high street retailers in city centres. According to Thomas, Bromley and Tallon (2006, p.43), the trend towards suburban ‘high street’ is starting to have a significant impact on the traditional high streets. As suburban retail parks seek to upgrade in a bid to offer more diverse services and goods, more high street functionality is likely to be added. Consequently, this will contribute to increased competitive threats.

Jones (2010, p.275) is also of the opinion that as an investment class, the traditional high street is now facing increased competitive threats. In his study, Jones sought to investigate the factors that led to the rise of the high street in the U.K and those currently contributing to its demise. Jones (2010, p.275) reports that the traditional U.K high street has come under increased threat as a result of new retail forms as well as decentralization of retailing. The study reveals further that the number of high street shops from the mid-1990s have declined by more than a half. Jones posits that the declining popularity of the high street as an investment destination can be attributed to the increasing online shopping as well as the recent economic crises.

Besides the out of town retail parks and digital channels, the traditional retail store continues to face increased competition from other emerging channels such as mail order, megastores, shopping centres and even supermarkets. However, the high street has been able to survive even this threat and promises to continue playing a significant role in the global economy. It is reported that the high street landscape, especially in the U.K and other leading economies, is evolving and that in future, the sector is likely to involve a much diverse mix of use involving leisure, retail and even office spaces. Fabio’s (2014, p.131) analysis of the U.K high street posits that it has lost its traditional identity. According to Fabio, the modern high street is characterized by payday, charity and even betting shops. He further states that the problems facing the high street vary from one city to another.

Fabio (2014, p.131) posits that with the increasing challenges in the high street, many retailers have decided to try out the online channels. He posits that such retailers have observed that the online sales are performing better than the sales from the brick and mortar store formats. Fabio argues that if the high street fails to adapt to the changes in consumer expectations and preferences, then the trend towards online shopping is likely to increase.

Longenecker et al. (2012, p.503) state that despite the many competitive threats the high street is exposed to, it is not yet dead. They point out that various retailers making use of the brick and mortar store formats have come up with innovative ways of ensuring they continue attracting customers. One such innovation is Shopkick, a mobile application that makes it possible for businesses to reward shoppers who enter the stores (Longenecker et al., 2012, p.503). Westerman, Bonnet and McAfee (2014, p.237) also argue that online channels are gaining more tractions over the traditional purchasing channels. They state that traditional stores have responded by integrating both online and offline channels, a process quite difficult to accomplish. Weltevreden and Atzema (2006, p.628) also acknowledge the fact that the emergence of the internet as a commerce channel has called traditional retailers into action as far as the utilization of the opportunities presented by the internet is concerned. In their study, Weltevreden and Atzema (2006, p.628) sought to investigate the response of store-based retailers to increased popularity of internet retailing channels in different Dutch City centres. They report that many city centre retailers have responded by creating business websites which they actively promote. They conclude that the internet is now an important component of the modern high street environment in Dutch cities.

E-Commerce and Its Impact on the Brick and Mortar Store Formats

With more businesses integrating the internet into their operations, e-commerce has become a norm. E-commerce is defined as the buying and selling of goods and services using electronic systems such as computer networks and the internet (Monga 2012, p.1). Conducting commercial activities using electronic means has contributed to and makes use of the many innovations in various sectors including money transfer, inventory management, marketing and supply chain management. Monga (2012) opines that e-commerce has experienced an explosion over the past few years. The explosion has led to the emergence of specific shopping patterns and behaviours among different groups of consumers. Besides making it possible for people to engage in commercial transactions without being subjected to distance and time barriers, e-commerce has also proven cost-effective and convenient to both the traders and consumers (H). According to Monga (2012, p.2), the benefits offered by e-commerce can be broadly categorized into customer benefits, marketing benefits and strategic benefits. Customer benefits include increased availability of product information, fast delivery of goods and services as well as the availability of a wide range of goods for which consumers can easily compare prices. The marketing benefits are derived by businesses and include the reduced advertising costs and improved market analysis (Monga 2012, p.2).

E-commerce comes in different forms depending on the parties taking part in the transactions. The main forms of e-commerce include business to business, business to consumer, business to employee, consumer to business and consumer to consumer (H). The increased utilization of the internet and related technologies by both consumers and producers of goods and services has had a significant impact on the traditional business processes and activities. The internet has helped shape new consumer behaviours and for retailers, it continues to impact how they market and sell their products. Besides making it possible for businesses to access new distribution channels, e-commerce has also made it possible for businesses to make significant cost savings by lowering product promotion costs as well as the costs involved in disseminating information. E-commerce has also contributed to increased efficiency in the delivery of products and services. According to Turban (2010), digitalised goods and services can be delivered within a very short period, a fact that has contributed to reduced cycle time.

Botha, Bothma and Geldenhuys (p.9) postulate that measuring the impact the e-commerce has had on various business activities is not a straightforward matter. They posit that there are two major views as far as the impact of e-commerce on business activities is concerned. These are the evolutionary view of e-commerce and the view of e-commerce as radical innovation. The evolutionary view of e-commerce views the new economy made possible by the internet as being just the same as the traditional economy with the only difference being the new platform on which modern business is conducted. According to this view, the e-commerce and commerce are different regarding the scale the transactions occur (Botha, Bothma and Geldenhuys p.9). The view of e-commerce as radical innovation perceives the emergence and increased utilization of the internet as a continuum of architectural and radical change. It views e-commerce as a redefinition of the world of business (Botha, Bothma and Geldenhuys p.9).

Nath (2012, p.8) points out that the increased popularity of e-commerce has led to many traditional businesses considering modernizing their operations. He opines that the key areas where traditional businesses are modernizing in response to the current e-commerce trends include marketing, advertising and sales. Soliman and Youssef (2003, p.546) also conducted a study on the impact that e-commerce has had on business operations. They are of the view that given the turbulent and dynamic nature of the contemporary global business environment, many businesses have seen it fit to transit from traditional approaches to business to modern methods. Soliman and Youssef (2003, p.546) state that e-commerce is one of the channels that promises to offer both emerging and existing businesses exciting opportunities to market themselves and their products. They argue that e-commerce has become normal day to day activities, thanks to the convergence of three important industries, namely the software industry, telecommunication industry and the content/media industry.

According to his investigation of the economic impact of e-commerce, Christopher (2011, p.88) reports it has brought about changes in both the business to business and business to consumer markets. According to Christopher, e-commerce has impacted both the business operations as well as consumer behaviour. He points out that the largest share of e-commerce transactions is accounted for by business to business e-commerce. The profit and cost situation of leading companies around the world has greatly changed over the years, thanks to the continued growth of business to business e-commerce. Besides resulting in lower levels of transaction costs, the increased popularity of business to business e-commerce has also led to lower costs of both the global and domestic sourcing. Christopher (2011, p.88) is also of the opinion that the steady growth of e-commerce has also had a significant impact at the macroeconomic level by contributing to increased competitiveness of businesses, increased productivity as well as downward pressure on inflation.

Christopher (2011, p.90) also opines that e-commerce has made it possible for some barriers that traditionally restricted increased interaction between consumers and businesses. He is of the view that through e-commerce, communication, time and distance barriers have been eliminated. The types of goods and service offered through the internet have also changed over time, thanks to the increased significance of e-commerce. In early 2000’s the only products that consumers could access through the internet were computer hardware. However, increased utilization of the internet by businesses and consumers has seen an increase in the variety of merchandise that consumers can buy online. For consumers, they have derived some benefits from the increased popularity of business to consumer e-commerce. Besides lowering product and service search costs, e-commerce has also resulted in lower product prices. However, many small retailers have been pushed out of the market as a result. According to Christopher (2011, p.90), many small companies tend to be less involved in e-commerce. However, with more consumers showing a preference for online shopping channels, some of the businesses are experiencing a significant reduction in the sales volume.

Being one of the most powerful economies around the world, China’s influence in the global e-commerce is quite significant. Qu and Chen (2014, p.66) point out that, over the last 20 years, the Chinese retail industry has constantly been experiencing increasing growth rates. The increasing growth of the Chinese retail industry is attributed to the economic boom the country has experienced over the past two decades. The country has also seen increased popularity of e-commerce over the same period, which, according to Zeng (2014), has slowed down the growth of traditional retail businesses. Qu and Chen (2014, p.66) state that the rapid speed at which science and technology is growing in the modern society means that the development of any country goes hand in hand with the developments taking place in the country’s IT sector. They report that the number of consumers doing their shopping through online channels in China has been on a steady rise starting from 2010. As of 2012, the total number of online shoppers in mainland China stood at 42.90% of the total population. They point out that besides proving its efficiency, e-commerce in China has also proven more convenient and non-restrictive regarding space and time (Qu and Chen 2014, p.66).

Tan and Ouyang (2004, p.3) posit that China has aggressively been engaging in a process aimed at improving its technology infrastructure. They report that this has resulted in increased diffusion rates of e-commerce in the country. However, Tan and Ouyang (2004, p.7) suggest that great disparities are evident regarding the technology infrastructure when some regions are compared to others. They point out that while large cities and coastal provinces that are economically endowed have better infrastructure to facilitate the penetration of e-commerce, remote areas in the interior lack the same privileges. However, the past four years have seen the country’s online retail market becoming even stronger. In 2013, China’s digital retail market overtook that of the U.S to become the world’s largest; an indicator that an increasing population of Chinese consumers now prefer online channels as opposed to the traditional brick and mortar channels (Statista, 2016).

A number of factors is driving the continued expansion of the Chinese digital retail market; one of them is the highly fragmented Chinese retail industry. This characteristic of the industry has led to the rapid utilization of the internet as a shopping channel by consumers and integration by other some businesses that traditionally did not use the internet retailing channels (Qu and Chen 2014, p.68). Besides that, there has been a rapid growth in internet penetration, a fact that has led to increased internet usage across the country. With the internet infrastructure improving over the years, the country now has even a better opportunity to improve on its e-commerce activities. The presence of large players in the e-commerce sector has also contributed to the increasing shift from traditional retailing formats to online retailing and shopping. These players include JD.com and Tmall, who through their marketing efforts have been able to influence many consumers into shifting from offline purchases to online purchases (Zeng, 2014).

There are other factors likely to push more Chinese consumers towards e-commerce. These factors include increased pace of urbanization, the increasing levels of disposable income as well as better communication and logistic infrastructure (Zeng, 2014). Many international e-commerce players are seeking to penetrate the Chinese markets and many other businesses still using the traditional brick and mortar formats are expected to integrate internet channels into their current operations. More consumers are also expected to shift towards online shopping given the many benefits that e-commerce has. With e-commerce retailing already accounting for the country’s largest portion of retailing revenues, many traditional businesses in the Chinese high street have started experiencing a decline in sales volumes as well as revenues (Zeng, 2014).

References List

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Botha, J., Bothma, C. and Geldenhuys, P. (2008). Managing e-commerce in business. Cape Town, South Africa: Juta.

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Posted on May 28, 2016Author TutorCategories Question, Questions