To what extent does online music retail challenge

To what extent does online music retail challenge

the traditional function of high street music retail merchants?

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Abstraction

High street music retail merchants face competition on two foreparts: online music retail merchants selling music in difficult transcript format, and administrations offering download services. This survey considers the challenges to traditional music stores by ( 1 ) comparing with other sectors through a SWOT analysis to set up the extent of the challenge and ( 2 ) sing the options open to such stores to turn to the challenge. The decision drawn is that both online and offline retail merchants are in the early phases of response to important and rapid alterations in retail channels, and that all these channels have some degree of trouble in run intoing consumer demands. It will be argued that the danger for high street music retail merchants is a short-run focal point that does non take into history the longer-term deductions and likely waies of developments. It will be suggested that increased focal point is required in countries where high street shops can develop positive distinction.

Contentsspage

1 Introduction 3

  1. Music 3
  2. High street retailers4
  3. Music retailers4
  4. Traditional function of the high street music retailer5

2 Literature Review 6

2.1 Traditional retail 6

2.2 Online retail 7

2.3 Consumer features 8

2.4 Consumer behaviour 9

2.5 Strategy and direction 12

3 Research 14

3.1 Research Area 14

3.2 Methodology 16

3.3 Analysis17

3.3.1 Music Retail 18

3.3.2 Clothing 20

3.3.3 Electronic goods21

3.3.4 Books 23

3.3.5 Greetings Card games 24

3.4 Datas 25

4 Discussion 27

5 Decision 28

Bibliography29

Websites31

Television interviews32

Online retailing is a comparatively new phenomenon, going a market force merely in the late ninetiess. This has created a new signifier of competition for offline high street retail merchants, and small clip to explicate an appropriate scheme and to put consequently. For high street record shops, such as HMV and Virgin, the image is peculiarly complex. They face competition from on-line Cadmium retail merchants such as 101CD, CD-Wow and Amazon, from supermarkets both off and on-line and from on-line download sites such as Napster and iTunes.

Furthermore, external influences runing from musical manners and the demographics and incomes of mark markets to holds in new releases from top-selling sets can hold a important impact on traditional music retailing.

Before sing the inquiry of on-line impact on offline retail merchants in more item, definitions should be established.

1.1 Music

The survey will look at music in difficult transcript format of audio merchandise, and downloaded files such as MP3s where information is purchased instead than a touchable object. Sheet music will non be covered: although there are similar issues with offline and on-line retail merchants of difficult transcript every bit good as the possible to download and self-print, sheet music is something of a specialized merchandise for a niche market with a figure of quite separate issues involved.

1.2 High street retail merchants

The traditional high street music retail merchant can be defined by topographic point and merchandise mix. The phrase ‘high street’ relates strongly to the UK: while the US has a close equivalent of ‘main streets’ , these are associated with little towns or territories. The US has a stronger civilization of out-of-town promenades than the UK. In the UK, out-of-town shopping provided by, for illustration, the Trafford Centre near Manchester or Meadowhall near Sheffield is competition for high street based retail merchants, although major retail merchants will hold mercantile establishments in the high street and at out-of-town Centres. These out-of-town Centres are similar to US-style promenades, yet many urban sprawls do non hold one in close propinquity. More common are retail Parkss, with a few big units: these are excessively large for many retail merchants to see. While planetary forms of online and offline ingestion will be considered in this survey, the focal point of the research will be in the UK, where high street retail merchants are still the most favoured channel for consumers buying non-perishable points ( delight refer to subdivision 3.4 for informations to back up this statement ) .

By ‘high street’ , the illation is town or metropolis Centre location. The music retail merchant will be one of broad scope of stores in the location. Parking is likely to be charged for, gap hours are typically 9am to 5.30pm Monday to Saturday and 10am – 4pm on Sunday. This contrasts with the free parking and longer opening hours of many supermarkets. Supermarkets are non included in the class of high street retail merchant in this survey, although on occasion research combines the classs, and many supermarkets have high street and metropolis centre mercantile establishments in add-on to out-of-town shops.

1.3 Music retail merchants

For the music retail merchants that will organize the nucleus of this survey, the chief merchandise focal point is ‘hard copy’ sound, with CD holding mostly superseded vinyl, except for some specialized genres such as dance music. Cassettes, which were the most popular format for UK album purchases between 1985 and 1991 ( www.statistics.gov.uk: Gross saless of Cadmiums, LPs, cassettes and singles ) , are now seldom offered.

Alongside the sound, music-related points such as Jerseies, postings, Cadmium racks, books and sheet music may be sold. DVDs – a category demoing peculiarly healthy growing at present – and games package are besides normally offered. Retailers such as HMV and Virgin fit this profile. Other retail merchants, peculiarly smaller, independent shops such as Selectadisc, carry a much narrower scope of merchandise, typically wholly music-based.

Mercantile establishments such as WH Smith and Woolworth’s who sell Cadmiums, but for whom music merchandises are one of a figure of lines and non the primary gross beginning, will non be considered in deepness, as their range for response to online music retailing is far wider because of the non-music merchandise lines that can be focused on.

There is the farther class of shops with both town Centre and out-of-town presences who sell Cadmiums, such as Boundary lines: once more, music does non supply the chief income watercourse, and books generate the nucleus gross.

1.4 The traditional function of the high street music retail merchant

The high street music retailer’s traditional function can possibly be best defined by mention to patterns in the 1980s, before the growing of the Internet. Music in assorted formats was the primary merchandise, with music-related points such as Jerseies, books, postings and magazines taking comparatively small shelf infinite. Home computer science was in its babyhood: the market is referred to as ‘puny’ in one article of 1981 ( archives.atarimuseum.com/archives/archives.html ) . Television channels were, for most, limited to four tellurian channels. Music hence operated in an environment with far less competition from other signifiers of amusement.

Music retail merchants have therefore been faced, in the last 20 old ages, with increased competition from other types of amusement – computing machine games and increased take-up of orbiter and overseas telegram Television channels – every bit good as from supermarkets, downloading and on-line shops selling music in hard-copy formats. This thesis focuses on the latter two, while mentioning to other countries in order to put the treatment in context.

2.1 Traditional retail

When Bon Marche , a section shop, opened in Paris at the terminal of the 19Thursdaycentury, it started a revolution in shopping. Considered one of the few topographic points that adult females could see unaccompanied and still retain their reputability, it was extremely advanced in that it displayed goods for shoppers to shop, instead than anticipating them to near a tradesman to bring goods for them ( Fiske 1989: 313 ) . This represented a switch from what a figure of observers have described as useful shopping ( e.g. Childers et Al ( 2001 ) ) , where a specific point is required and so sought, to a mixture of useful and hedonistic ( ibid ) attacks, with hedonistic being where shopping and purchasing in itself is the purpose, and the merchandise that will be selected is non identified when the shopper foremost embarks on the shopping trip.

It could be argued that the Internet has had the most important and rapid consequence in history on retail. However, retail has developed significantly over the last half century in a figure of ways, and the Internet is one of a series of developments. Lindstrom outlines this ( 2001: 3-9 ) with peculiar mention to UK food market shopping, and the alterations can be summarised as follows:

  1. A move to self-selection ( instead than showing a tradesman with a list which he/she would bring for the client ) , from the 1950s
  2. Growth of supermarkets in the sixtiess
  3. Growth of branding
  4. Increased maker control over pricing from the 1960s, switching to supermarket control over pricing from the 1990s
  5. A rapid growing of Internet retail from the late ninetiess

However, retail patterns vary well from state to state. In France, for illustration, supermarkets are less utilized for hebdomadal nutrient shopping and other beginnings are widely used ( Blythman 2005: thirteen ) .

The alterations in record-buying in the UK are as follows:

  1. A singles-based market in the 1950s and early sixtiess ( Du Lac 2006 )
  2. Growth of album market ( www.statistics.gov.uk shows a general upward tendency, with some fluctuations, since 1973 )
  3. Top outing of singles market in the late seventiess, mounting once more to similar degrees in 1997, later falling once more ( www.statistics.gov.uk )
  4. Re-emergence of singles market through downloads ( Du Lac 2006 )
  5. The ‘hard copy’ singles market has declined significantly, except for the vinyl singles market, which is strong ( Jones 2006: Television Interview ) .

2.2 Online retail

Particularly apparent in literature on Internet shopping is a deficiency of acknowledgment of its possible significance in commentary dating from prior to 1999. This is despite grounds that e-commerce was being explored much earlier. An IBM pilot selling gifts took topographic point in 1994 ( Lowe et al 1996:28 ) and Amazon.com was incorporated in July 1994, selling its first book the undermentioned twelvemonth ( Amazon corporate web site at phx.corporate-ir.net/phoenix.zhtml? c=176060 & A ; p=irol-corporateTimeline ) yet in 1999, the lone mention made by Schor et Al is a brief reference of how as shoppers we “satisfy our desires with a late-night chink of the mouse” while other literature does non mention to the Internet. MacKay ( 1997:289 ) provides a list of the varied uses the Internet has, but does non advert shopping at all.

Harmonizing to research by Verdict Research, outlined in Demarzio ( 2006 ) , of the ?265bn retail market in the UK in 2005, on-line gross revenues accounted for merely ?8.2bn. However, the rate of growing of on-line gross revenues was 29 % , whereas the retail sector overall grew 1.5 % , showing a important switch by consumers from offline to online buying. The report’s writer besides notes how on-line shopping affects offline shopping, as consumers can research merchandises and monetary values before sing the high street ( ibid ) .

A UK study carried out for Deloitte ( 2004 ) identifies four key countries in which on-line retail merchants are challenged by offline shops: decelerate web sites may do defeat, bringing and after gross revenues service can be missing, offline shops are working to better the retail experience for the consumer, and there are concerns sing the security of on-line payment systems. XTN place farther issues: 32 % of consumers have left an on-line music retail site because of meeting troubles during their visit, and 22 % are “disappointed” by the clip taken to present a Cadmium ( 2006a: 3 ) .

Deloitte’s 2004 study does demo an increased tendency for Christmas shopping on the Internet, increasing from 2 % in 1998 to 29 % in 2003 and 32 % ( projected ) in 2004. Deloitte is cited by Madslien ( 2005 ) : the administration claims that the web sites of high street shops are the most popular for Christmas shopping, instead than sites of strictly on-line retail merchants.

2.3 Consumer features

The genres normally described as ‘pop’ and ‘rock’ music, and their assorted bomber genres, have traditionally been seen as merchandises for a younger demographic. Benson ( 1994: 46 ) depict how in the UK in the mid 1970s, 160 million records were sold, of which 100 million were bought by 12-20 twelvemonth olds. Benson’s figures are based on combined individual and album purchases ( the figures are supported by www.statistics.gov.uk ) . However, audience demographics saw a important displacement by 2002, with 40-49 twelvemonth olds accounting for a higher per centum ( 19.1 % ) of album purchases than 12-19 twelvemonth olds ( 16.4 % ) . Using the authorities statistics for the mid 70s ( 1974-1977 ) and integrating Benson’s 100 million figure, the minimal portion of album gross revenues attributable to 12-20 twelvemonth olds would be 38 % .

This shows how the market is no longer dominated by one peculiar age group, and retail merchants must provide for the different incomes, purchasing wonts and gustatory sensations of different age groups.

Music has a peculiarly strong value as an articulator of cultural and subcultural capital. Cultural capital is a construct ensuing from research by Pierre Bourdieu ( 1984 ) , with a sample of over 1000 people asked elaborate inquiries about their life styles and gustatory sensations. Bourdieu’s decision was that there was a correlativity between penchants for certain types of music and the societal, educational and economic background of the person. The cultural apprehension acquired by those with ‘better’ backgrounds was used to consolidate their place in society, reflecting conventional measurings of success. The gustatory sensations acted as ‘codes’ deciphered most accurately by those of similar backgrounds, and termed ‘cultural capital’ by Bourdieu. Although the musical penchants researched were wholly classical-music based, and the research was done in France, the construct has later been applied in other spheres. Most noteworthy is likely the research of Sarah Thornton ( 1995 ) which developed the construct of subcultural capital. While Bourdieu’s topics were considered in a mainstream, aspirational model, Thornton suggested that different ‘codes’ were used to denote rank to a subculture, and music is an built-in portion of this. Subcultural individuality is publically articulated by certain musical penchants which might be expressed through a nomadic ringtone, a T-shirt citing a set, or the purchase of a peculiar record. The high street music store presents an environment in which subcultural codifications can be displayed in groups or separately, heightening the sense of ego.

2.4 Consumer behavior

The rise in Internet use in recent old ages has been important: in 1998, a canvass found 8.7 million people in the UK had accessed the Internet in the old twelvemonth from a population of around 60 million ( news.bbc.co.uk/1/hi/sci/tech/159014.stm ) . A MORI canvass in May 2001 found that 10 million places had Internet entree compared with 6 million in May 2000. A UK Government study in October 2005, showed that 29 million had accessed the Internet in the old 3 months compared with 18 million over the same three month period in 2000 ( www.statistics.gov.uk ) . There has been a peculiarly noticeable rise late in UK place broadband connexions, which now outnumber dial-up connexions. Between April 2003 and July 2005, the figure of UK places with broadband entree increased from 8 % to 31 % ( ibid ) , enabling, among other characteristics, much quicker downloading of pages of retail web sites where sing artworks of merchandises had been really time-consuming with a dial-up connexion.

Several surveies have looked at consumer behavior in the online environment. Childers et Al ( 2001 ) in their survey of useful and hedonistic shopping in an on-line context discovery that the usage of online shopping sites depends on similar factors as the acceptance of new package in the workplace: a combination of usefulness, easiness of usage and enjoyment are the most important elements, with usefulness and easiness of usage more of import to the useful shopper and easiness of usage and enjoyment more of import to the hedonistic shopper.

Sveningsson ( 2002 ) once more identifies useful and hedonistic ( termed ‘experiential’ ) inclinations, but from elaborate interviews with topics, finds that a useful shopping manner is typical for on-line buying while an experiential shopping manner is deployed in a traditional record store, proposing that this may be due to the design of record e-tailers’ sites. However, as this survey has a sample of merely 7 topics, generalizations are non executable: it is more utile in showing some differing attitudes to music ingestion.

What may do sense to the concern analyst may be more complicated in footings of cultural consideration. For illustration, Olausson ( 2005 ) holds the position that subscription services will go the dominant theoretical account for obtaining music online. This has deductions for traditional retail merchants because of the limitless choice of music available for a fixed monetary value, which is a more distant signifier of ingestion than purchasing a Cadmium over the Internet, or even paying per vocal or album for a download. But the subscription theoretical account, while surely looking more logical and practical, overlooks the reserves of music consumers such as ‘Hannes’ , a topic of Sveningsson’s research ( 2002 ) , for whom the MP3 holds no involvement: the tangibleness of merchandise is of import. XTN province that 75 % of music purchasers prefer a touchable Cadmium to a digital file ( 2006a: 3 ) .

Identifying the consumer is frequently ambitious, non least because many persons use a scope of channels to obtain music. The CD-buying “Fifty Quid Bloke” was described by David Hepworth, a veteran of music news media, in a address to the British Phonographic Industry ( BPI ) in July 2003. Fifty Quid Bloke is defined as elderly 35+ , with a comfy disposable income, and was identified by Hepworth’s retailing friends who had noticed older, normally male purchasers in shops such as Virgin and HMV buying a combination of Cadmiums, DVDs and books, typically passing ?50 per visit. Fifty Quid Bloke is “a large user of the web, …but unlike his kids, he wants to have things” ( De Lisle: 2004 ) i.e. he prefers the touchable Cadmium format. This is reflected in figures from the BPI placing a switch in demographics for the group responsible for the biggest market portion, from the 12-19 age group to the 40-49 age group ( ibid ) . Yet Bachelor ( 2005 ) cites UK research demoing that 40-49 twelvemonth olds are besides the dominant market in downloading. While they represent 19.1 % of the Cadmium purchasing market, they represent more than double that in the download market ( 40 % of 96 % = 38.4 % ) .

A go oning quandary for the industry is a balance between protecting right of first publications and offering music in a format that encourages purchase. Thomas ( 2002:80 ) provinces that the ethos of the Internet is of sharing information instead than gaining from it, comparing illegal file-sharing to the established pattern of taping or firing a Cadmium for a friend, with the lone difference being in the immense distribution web now runing for this sort of activity because of the Internet ( ibid: 90 )

Shirky ( 2001 ) discusses the economic strain on record companies, where fixed costs are high and fringy costs really low. The importance of economic system of graduated table agencies that an on-line menace is really important, therefore the development of DRM ( Digital Rights Management ) .

2.5 Strategy and Management

A brief overview of literature on scheme is of import to supply a theoretical context in which the attacks of high-street retail merchants can be examined. Porter ( 2001 ) discusses the schemes used by Internet retail merchants, and argues that many of them have made cardinal strategic mistakes, peculiarly in emulating rivals instead than developing a unique offer ( 2001: 72 ) . He makes specific mention to the record industry, theorizing that on-line distribution may take to a decreased demand for Cadmium fabrication, but recognises that many links in the supply concatenation, such as happening new creative persons, publicity, production and recording and airplay will still be required. The paper is a development of Porter’s earlier five forces theory ( Porter 1979 ) which looked at how competing administrations are affected by their providers, clients, barriers to entry and issue from a market and the possible usage by clients of replacement merchandises. The theories are applicable across different industries and sectors beyond retail, but are no less applicable to retail merchants. Porter’s consistent message is differentiation through via media: “A scheme delineates a district in which a company seeks to be unique…You can’t be all things to all people” ( Hammonds 2001:150 ) . Porter pays peculiar attending excessively to the importance of a “unique value proposition” ( 2001: 71 ) , intending that the manner in which the administration operates must contrast with its competitors’ methods: to set up a sustainable competitory advantage, a company must execute different activities than challengers or execute similar activities in different ways” ( ibid ) .

Porter’s theories underline the importance of making a value proposition i.e. supplying the consumer with clearly-defined benefits through utilizing a peculiar provider. Retailer homogeneousness removes the chance for distinguishing value propositions and the consumer may no longer be motivated to utilize high street retail merchants.

The Boston Consulting Group Matrix ( Henderson 1970 ) is besides pertinent: a company’s merchandises are categorised by the BCG matrix harmonizing to market growing and market portion. The purpose is to hold a portfolio where established merchandises, with low growing but high market portion ( hard currency cattles ) , help fund the development and publicity of new merchandises non yet established in the market ( inquiry Markss ) . Merchandises with strong growing and market portion ( stars ) guarantee the hereafter of the administration. Henderson suggests that to be successful in the long term an administration needs a portfolio which includes merchandises falling into each of these three classs.

IDC’s ‘Responsive Retailing’ study provinces that “retail success in 2005 relies on puting in equal multi-channel schemes. Market information has already demonstrated that a deficiency of multi-channel capablenesss is a forecaster of gross revenues decline” ( IDC 2005: 2 ) . Rao, meanwhile, advocates better stock direction to cut costs, with distribution centralised and the usage of ‘just-in-time’ manners of operation ( Rao 1999: 289 ) .

HMV outline their programs for growing on their corporate web site ( www.hmvgroup.com/aboutus/progress.jsp ) . Their scheme covers a figure of trade names in their portfolio and several markets, perchance to distribute hazard. The HMV-branded shop growing scheme includes increasing the figure of UK mercantile establishments through a focal point on opening stores in a figure of moderate-sized towns and besides increasing presence in Japan. These are viing in spheres where downloads are prevailing: iTunes launched a service in Japan in August 2005 ( McCurry 2005a ) , and Yahoo! entered the market shortly afterwards ( McCurry 2005b ) . This has resulted in a much more competitory environment for the music market in Japan, as download sites already established ( such as Mora, an industry pudding stone catering for Nipponese users with Sony devices ) offer a far smaller choice at a higher monetary value per path. HMV farther spread hazard by concentrating on a scope of merchandises, peculiarly DVDs, where they have identified a peculiar country of growing. A partnership with Microsoft to establish a downloading site is intended to enable HMV to vie more efficaciously with iTunes.

Fox ( 2005 ) looks at the competition from supermarkets and its affect on traditional music shops. The survey focuses on Wal-Mart in the US market, a retail merchant for which music is merely responsible for 2 % of turnover. Wal-Mart utilizations gross revenues of to a great extent discounted, frequently loss-leading music merchandises to convey clients into its shops, in the hope that the losingss gross revenues of music incur will be compensated for by the purchase of a scope of other, more profitable, non-music lines.

Goodgold ( 2003 ) focuses on five successful United states retail merchants, in different market sectors, to seek and happen the grounds for their success, placing two cardinal lending factors: a thorough cognition and researching of their mark market combined with a focal point on the purchase being accompanied by a alone experience aimed to heighten the enjoyment of shopping – clearly a focal point on the hedonic instead than the useful.

3.1 Research Area

From the reappraisal of literature above, it is clear that the topic under consideration is complex. This survey supports a multi-disciplinary attack sing concern, cultural and media theories, every bit good as some recognition of different manners of music and the demographics and buying wonts of their audiences. Indeed, the literature associating to the capable country is often narrow in its attack identifying generalized tendencies but traveling into small item. For illustration, it is non clear whether Fifty Quid Bloke ( De Lisle 2004 ) is besides downloading ( Bachelor 2005 ) or whether the offline and downloading groups are reciprocally sole. This survey will non seek to set up which is the instance ; a large-scale, complex survey would be required to make so. However, it does show the complexness of catering for a broad assortment of consumers utilizing different combinations of gross revenues channels.

The inquiry “to what extent does online music retail challenge the traditional function of high street music retailers” now needs to be addressed. In the debut, definitions of on-line music retail, high street music retail and the traditional function of the latter were explored. “Extent” is a more troublesome construct. Ideally, it would be quantifiable in some manner, but the issues are instead excessively complex for a orderly statistical analysis. The quandary above sing Fifty Quid Bloke and forty-something music downloaders suggests that replies can merely be gleaned through extended, qualitative research, and even this would merely supply a snapshot position of a consumer which could be impacted by a scope of variables from the monetary value of an iPod to a hold in the release of a Coldplay album.

Since ‘extent’ is non quantifiable, it is possibly more appropriate to see it on a comparative footing. It is hence suggested that features of a scope of merchandises that would, prior to the rise of the Internet, have been purchased on the high street, are compared, and statistics on offline and online gross revenues considered alongside these analyses. This might supply some thought of how features of a merchandise do it peculiarly attractive for on-line gross revenues. The retailing of Cadmiums will be compared to that of books, apparels, electronic goods and salutations cards utilizing statistics from a scope of different studies located during secondary research. Comparisons will besides be made of consumer patterns such as pre-purchase test: seeking on vesture before purchase is usual, while seeking a electric refrigerator before purchase is non.

The rationalist attack to research is reflected in many of the studies, typically undertaken by research bureaus, which aim to supply a image of the features of retail, such as demographics of consumers, per centums of consumers choosing to utilize online or offline gross revenues channels, or penchants for subscription or pay-per-download services. These studies provide interesting and utile statistics which have already been cited and which will be drawn on farther. The rationalist attack is usually really structured, utilizing methods that can easy be replicated. Results normally lead to a generalized observation.

This attack will non be used for this research for a figure of grounds. First, many studies with big, scientifically-selected samples have already been carried out, sometimes repeatedly over a period of clip to place any tendency. It would be hard to bring forth research with the same degree of quality because of the practicalities of obtaining an indifferent sample of similar size. As this information is already widely available from a figure of believable beginnings, there is small to be gained by set abouting a similar study.

Furthermore, there are disadvantages to these surveies. Consequences are generalised, and expression at a limited set of variables, supplying a snapshot image. It is far more utile to collate a figure of surveies to derive a more accurate image of music retail by utilizing them aboard unquantifiable but nevertheless of import issues that offline retail merchants must see in order to vie with on-line retail merchants in the multi-channel market place.

The purpose of the research is to set up the extent of the consequence of on-line music retailing on high street music retailing. By constructing a broader image of purchase of music, in the context of the purchase of other types of goods, the inquiry posed in the rubric can be addressed.

3.2 Methodology

In order to see the nucleus inquiry posed, a comparative survey will be used to put music retailing in the broader retail context, looking at its features when compared to other markets. These will be subjected to SWOT analysis to construct a image of the assorted strengths and failings of high street retail merchants ( i.e. their internal features ) and the menaces and chances confronting them ( i.e. external issues ) . The same will be done for on-line retail merchants. This will assist construct a broader image of the extent to which online retailing challenges traditional retail channels by and large. By looking at statistics for these different sectors, the challenge posed to high street music retail merchants can be assessed relatively and practical responses to it considered.

The SWOT analyses will concentrate strictly on the offline retailers’ places. Since some factors are common to all retail sectors, these are outlined at the beginning of the following subdivision. This avoids repeat and besides means that the analyses of single retail sectors will be more comparable in extent of challenge posed by on-line retailing.

3.3 Analysis

The first analysis below considers strengths, failings, chances and menaces faced by the whole high street in the face of on-line competition.

High Street Retailers – General

Strengths

Failings

  • Able to pull passers by
  • Able to make attention-getting shows instore
  • The bulk of merchandises can be taken place from the store instantly after purchase
  • Customer can touch the merchandise
  • Low hazard for clients purchasing more expensive goods, as they will non acquire lost in the station
  • Customer reserves about any merchandise can be dealt with by a member of staff
  • Adept staff can place a merchandise to run into a customer’s demands
  • Susceptible to shoplifting
  • Higher operating expenses than on-line retail merchants
  • Logisticss issues for guaranting stock is at a figure of different sites
  • Number of clients who can be served is limited by the figure of forces present
  • Product scope on show limited by infinite
  • Goods may be damaged while on show
  • Bad conditions can hold a important negative consequence on gross revenues
  • Different placement and competition in each town means a assortment of attacks may be needed from subdivision to subdivision, doing it harder to develop a individual ideal
  • Parking limitations and costs may discourage shoppers

Opportunities

Menaces

  • Differentiation from on-line retail merchants through focal point on the shopping experience
  • Puting up a complementary web site creates synergy and can do usage of an established and trusted trade name
  • Popular stores nearby can increase footstep
  • Increased entree to the cyberspace
  • Increased broadband entree, doing on-line shopping quicker and easier
  • The Internet makes it easier to turn up the lowest priced provider
  • Closing or location alteration of nearby retail merchants can cut down go throughing trade
  • Construction of a new supermarket can draw gross revenues off from the high street

This shows that the high street still offers a figure of advantages over on-line retail merchants. The menaces from the Internet are less debatable for retail merchants who develop on-line retail channels: for them, a web site with good functionality and attractive pricing has the possible to profit from multi-channel synergism and established trade name in a manner that strictly online retail merchants are unable to make.

3.3.1 Music Retail

High Street Music Retailers

Strengths

Failings

  • Customers may hold a merchandise identified by humming or singing an infusion to a staff member
  • Tangible merchandise can non be lost in a hard-drive clang
  • Music played over the shop’s sound system can take to gross revenues
  • May be impractical to present unrecorded public presentations in smaller subdivisions
  • The costs of fiting many smaller mercantile establishments with cutting border ‘hear-before-you-buy’ engineering could be prohibitory
  • Capable to VAT, unlike offshore on-line retail merchants such as Play.com and CD Wow

Opportunities

Menaces

  • Potential for multi-channel retailing with on-line Cadmium telling and downloads available in shop every bit good as online
  • Customers can be attracted by instore sign languages and public presentations by sets
  • iPod proprietors purchase more Cadmiums than mean hearers ( XTN 2006a:3 ) so could be targeted by marketing enterprises
  • The bulk of music hearers prefer Cadmiums to digital files ( ibid )
  • The download industry is compromised by consumer defeat at incompatible files and hardware and DRM engineering: high street retail merchants can advance their strengths in these countries
  • Illegal downloads ( these besides threaten on-line Cadmium retail merchants and legal download sites )
  • Increased ownership of MP3 participants ( this besides threatens on-line CD retail merchants )
  • DVD and game grosss may be affected by technological developments doing downloads more practical
  • All types of music retail merchant are affected by the sum of popular new music being produced: nevertheless, high street retail merchants, with more operating expenses to cover, may be less able to get by with letups.
  • Addition in file-sharing from 25 % of cyberspace users in September 2005 to 28 % in March 2006 ( XTN 2006b: 9 )

The chief challenges from on-line Cadmium providers for high street retail merchants are the assortment of merchandises offered and competitory pricing. While HMV’s flagship Oxford Street store carries 150,000 different Cadmium rubrics, few record stores have the same capacity. Online retail merchants, without physical selling restraints or the costs of high street floor infinite, can transport many more rubrics, while several download sites now offer in surplus of 1,000,000 different paths.

Online retail merchants have centralised distribution and therefore simpler logistics and fewer operating expenses, with several runing offshore to cut down costs even further through turning away of VAT.

High street retail merchants have reduced monetary values of chart albums to vie with supermarkets and on-line retail merchants, but the costs of conveying a Cadmium to a consumer ( see O’Kane 2004: Secton 6.1 ) intend big volumes need to be sold because of decreased borders. Back catalogue rubrics are typically more expensive, but sell good: they are estimated to account for over 60 % of HMV’s music gross revenues ( ibid: Section 6.2.1 ) . However, a price-sensitive buyer can usually obtain back-catalogue Cadmiums more stingily on-line, peculiarly by look intoing several sites.

The installation of being able to listen to tracks prior to buy gives on-line retail merchants an advantage at present, with merely larger high street shops offering hearing installations for more than a few albums. This is an country for offline stores to develop.

Cadmium retail merchants both on and offline have an advantage over downloading sites. 75 % of music consumers want touchable merchandise ( XTN Data 2006a: 3 ) and remarks from consumers in news.bbc.co.uk’s “Online music lovers ‘frustrated’” study ( news.bbc.co.uk/1/hi/technology/4474143.stm ) place jobs with mutual exclusiveness of assorted formats and hardware, every bit good as possible loss of purchases in the event of difficult thrust failure.

High street retail merchants have the added advantage of being able to offer personal service through the advice of staff, who may be able to place a path or album that a client is non certain of the name of. The shared experience of the hedonistic visit, peculiarly for young person subcultures, and usage of browse and buying as subcultural capital, publically jointing individuality, can be utilised by high street shops to their advantage.

3.3.2 Clothing

High Street Clothing Retailers

Strengths

Failings

  • Fabric texture is of import to purchasing determination and can non be experienced in online shopping
  • An point sold in e.g. Monsoon on the high street will be sole to the concatenation
  • The high street allows a client to seek on an point before purchase
  • Quality of merchandise can be assessed before purchase
  • Trying on apparels instore is hard for female parents with immature kids
  • Each point will necessitate to be displayed in several sizes, taking up floorspace
  • Care of tidy apparels racks and shows can be hard at busy times – peculiarly with folded points

Opportunities

Menaces

  • Personal shopper service
  • Online apparels retail merchants can provide for a larger geographical country, doing it more practical to provide for niche markets: high street shops may happen that progressively their market is reduced to average-sized persons

High street apparels retail merchants appear to be in a better state of affairs than music retail merchants for viing with on-line providers. Collections are specific to certain stores, so that a frock stocked by Monsoon is improbable to be available anywhere else. Trial is of import for a client to see that an point ( a ) tantrums and ( B ) is aesthetically delighting when worn, and fabric texture is besides a factor act uponing purchase which can non be provided by sing online. Photography of a merchandise reproduced online may neglect to demo item of an point, and as color varies from proctor to supervise, accurate portraiture of a merchandise online is hard. Sizing varies from store to shop: a Marks and Spencer ladies’ size 12 uses a hip measuring of 37.5 inches ( 95cm ) ( www2.marksandspencer.com/help/size_guides/women/clothing.shtml ) while at Boden size 12 hips are 39 inches ( 99cm ) ( www.boden.co.uk/yourquest/w_size.asp ) .

While many online dressing retail merchants give some indicant of what measurings constitute, say, a size 12, single proportions vary and a tantrum is non guaranteed. Some well-known high street names e.g. Topshop and Dorothy Perkins do non give sizing ushers on their web sites. With aesthetics and single manner of import to many shoppers, there is a hedonistic component to apparels shopping. Even if the shopper has some thought of what they would wish to buy e.g. a apparent white jersey and appears useful in their attack, there are assorted manners, tantrums, monetary values and classs of cloth that encourage a more hedonistic shopping manner.

Online purchase may be preferred where an point has been tried on in the store but where it has been soiled or damaged while on show, or where the right size is non available in a local shop.

The state of affairs with high street apparels retail merchants is, for the above grounds, rather different to the state of affairs for music retail merchants, as offline shopping offers of import characteristics for consumers that an online experience merely can non retroflex.

3.3.3 Electronic goods

High Street Electrical Retailers

Strengths

Failings

  • Lower hazard for purchasing expensive, smaller points such as MP3 participants
  • Accessories such as overseas telegrams do non incur delivery/postage costs which may be disproportionately high for cheaper points
  • For larger points such as electric refrigerators and rinsing machines, bringing may be no quicker than if the point is bought online
  • White goods need a significant sum of floorspace, doing metropolis Centre locations expensive
  • Many purchases are non impulse bargains so there is more likeliness that the shopper will shop around for monetary value

Opportunities

Menaces

  • Delivery system for white goods means substructure is already in topographic point for bringing of on-line orders of the same goods
  • High street retail merchants are sold goods at lower monetary values than on-line retail merchants assisting them vie
  • Office of Fair Trading may oblige makers to bear down the same monetary value to online and offline retail merchants

Electronic goods are nearer to the Cadmium market in that indistinguishable theoretical accounts are available through a figure of different administrations and mercantile establishments. Pre-purchase test of a electric refrigerator or MP3 participant is non executable: the most an offline shop can offer on many goods is a ‘touch’ experience and a sense of size which is hard to reap from an online shop. However, on-line research frequently provides more elaborate specifications than instore show cards, and on-line consumer reappraisals may besides be influential.

A figure of electronic points, peculiarly white goods such as rinsing machines and electric refrigerators, are typically delivered a two weeks after purchase in an offline store, offering no advantage over on-line purchase.

Possibly the largest driver to online providers is a monetary value derived function. High street electronics retail merchants are going more dependent on their web sites: pricing of a 20Gb NWA3000 Sony MP3 participant was ?170.68 at dixons.co.uk ( web site of high street shop ) and ?168.43 at amazon.co.uk ( online merely ) : nevertheless, Dixons’ instore monetary value is ?199.99 ( all web sites accessed 05/04/06 ) . The high street has been boosted by makers of electronic goods bear downing higher monetary values to online-only concerns, enabling high street retail merchants to continue borders ( Press Association 2005 ) : nevertheless, this is being investigated by the Office of Fair Trading.

Many electronic goods reflect a higher hazard for on-line purchase. Electronic appliances such as higher-specification MP3 participants cost 100s of lbs instead than less than ten lbs, so consumers may comprehend that possible harm to an point, or a smaller online provider going bankrupt and hence non providing the goods, is non deserving put on the lining. Indeed, the Chairman of Dixons encouraged the latter position in remarks prior to Christmas 2005 ( Finch 2005 ) .

To summarize, although electronic merchandises and CDs portion many of the strengths and failings of offline versus online retail merchants, the higher pricing of many electronic merchandises means the security of an offline purchase is a far more important factor than for a Cadmium.

3.3.4 Books

High Street Retailers: Bookshops

Strengths

Failings

  • Easy to shop through books in an offline shop
  • Opportunities for eyecatching selling
  • Widely used as meeting topographic points, with many bookstores doing extra grosss through java gross revenues
  • Can transport a strong choice of local involvement books
  • Reappraisals of books can be displayed and all be positive ( unlike many on-line reappraisals )
  • Small mugwumps find it peculiarly hard to sell equal volumes to cover price reductions, required to vie with on-line retail merchants

Opportunities

Menaces

  • Potential for instore publicities such as sign languages and readings
  • Possibility of installations at Stationss and airdromes to download books to MP3 participants
  • Online sites may offer new and second-hand transcripts of the same rubric
  • Longer term, engineering may take to an alternate to paper books

High street book retail merchants have several advantages over their on-line rivals. The most important is that the consumer can read a big figure of pages of his or her pick before purchasing. While some online services offer sing of content listing, indexes and the first few pages of a book, this is non cosmopolitan and may non expose information which the consumer is peculiarly interested in. Diet books, for illustration, seldom give any information on what is required and what nutrients should or should non be eaten until good beyond an debut.

Branchs near or in train Stationss and airdromes can pull impulse purchases for journeys and vacations, which the bringing times for on-line purchases make impractical. Furthermore, there is no bringing charge, while on-line sites such as Amazon merely offer free bringing for disbursement over a certain degree, while second-hand purchases each incur a bringing charge as they are non dispatched from Amazon’s warehouse. As Cadmiums are smaller and lighter than most books, bringing charges are lower and less of a deterrence to purchase online.

Many bookstores have already sought to heighten the hedonistic component of shopping, with comfy seats to sit and read possible purchases, promoting tarriance, and java stores. With ‘bibliophile’ ( book-lover ) a term in broad usage, book browse has possibly been recognised as the leisured, hedonistic experience by booksellers in a manner that music buying has yet to accomplish.

3.3.5 Greetings Card games

High Street Retailers: Card Shops

Strengths

Failings

  • Wide choice can be displayed in little store
  • Paper cards considered more personal by receivers than e-cards
  • Card games are peculiarly susceptible to damage instore
  • Consumer must pay for cards – unlike free e-cards

Opportunities

Menaces

  • Online reminder services – the user can name particular occasions and have an electronic mail reminder to purchase a card ( Birthdays offers this on their website www.birthdays.co.uk )
  • Electronic mails and texts frequently used alternatively of cards, peculiarly by younger people
  • Tendency to do a charitable contribution alternatively of directing Christmas cards – encouraged by charity web sites e.g. Cancer Research UK offers the installation to direct e-Christmas cards to promote contributions
  • ‘Sign and send’ online services which handwrite and ‘snail-mail’ cards, integrated with a reminder service.

The on-line card market is worthy of consideration as it has some analogues with music downloading. Sending an e-card is a straightforward procedure and, in many instances, free of charge.

The important difference between the music download and ecard market is that cards are given to others, and a free cyberspace card does non impart itself to expose, as many receivers like to make. An e-card may be taken to connote that the transmitter does non desire to travel to the problem and disbursal of purchasing a traditional card. This is more acceptable at Christmas, where a charity contribution in stead of all cards, advised by electronic mail or e-card to friends and household, is considered more acceptable. Mintel’s study into salutations cards and letter paper markets makes small reference of the cyberspace other than to detect that e-cards are perceived as lacking in personal touch ( 2005, at reports.mintel.com/sinatra/reports/index/ & A ; letter=7/display/id=114739 & A ; anchor=a114739 ) .

3.4 Datas

Data for on-line buying necessarily includes statistics for the online retailing by high street shops, and is seldom broken down. Research by XTN ( 2006c ) into online music buying does, nevertheless, put Amazon good in front of all its UK online rivals, procuring 25 % of the on-line hard-copy music market. HMV has 4 % , while Virgin has 3 % . The leaders of the online market for Cadmiums are all etail-only: the four with the largest portions are Amazon, CD Wow ( 19 % ) , Play.com ( 16 % ) and eBay ( 12 % ) ( XTN2006c ) . There is no dislocation of proportions of second-hand Cadmiums – which high street retail merchants seldom offer – yet the survey does place that 26 % of Amazon’s CD gross revenues arise from personalised recommendations ( XTN 2006a ) , an country in which high street shops are limited. This could be approached through trueness card engineering, as Tesco have done: nevertheless, Tesco’s Clubcard engineering has been developed over many old ages, and the graduated table of Tesco’s activities and grosss give it far greater fiscal resources to put in the strategy than any of its challengers, and surely more than high street record shops have.

A study of book gross revenues in 2004 showed that the major book retailing ironss along with independent bookstores still had about 55 % of the market – this figure excludes supermarkets ( 9 % ) , while the cyberspace had 7 % ( Robarts 2005 ) . The remainder can be accounted for by mail order companies and non-specialist stores. This is despite on-line bookstores with immense choices, extended discounting and many rubrics available secondhand. However, it should be noted that the figures for major ironss do non separate between high street subdivisions and out-of-town subdivisions.

Datas from the research bureau Verdict gives the Internet a greater portion of the books market in 2004, with 10 % of book gross revenues and 11 % of Cadmium and DVD gross revenues ( Dey 2005 ) .

Internet retail merchants hence have a smaller portion of the books market than they do of the Cadmium market. The focal point by many bookstores in recent old ages on doing visits a enjoyable experience, drawing clients past shows by locating coffee mercantile establishments at the dorsum of stores, shows a more developed construct of experiential shopping than many music stores presently offer

Research suggested that 20 % of electrical goods bought over the Christmas 2005 season would be purchased online ( Oliver 2005 ) – this was the highest portion shown by any research found for this survey, although Madslien ( 2005 ) suggests the sites of high street shops would be the biggest donees.

A 2005 Verdict study ( cited at hypertext transfer protocol: //news.bbc.co.uk/1/hi/business/4281927.stm ) found that the most popular points for on-line purchase were books, pictures and Cadmiums. The following most popular class was electronic goods, while apparels came 3rd: nevertheless, the books, pictures and Cadmiums classs were amalgamated, and the figures were based on per centum of those questioned who had bought these points online, and non on the grosss generated or market portion of online channels. Additionally, on-line apparels retail is dominated by the Internet retail activities of high street shops such as Next and New Look.

Greetings cards gross revenues in the UK are ?1.2bn yearly ( www.investni.com/gateway_to_europe_nov_05-2.pdf ) . The market is mature, but no literature or research found identified an Internet retail merchant menace to the high street card stores. The importance of the personal touch and a presentation of idea and attempt remains cardinal to tease gross revenues: it could be argued that this is a cardinal map of the card, as it has no other usage.

A comparing with other retail sectors suggests that music is peculiarly vulnerable to dispute from on-line beginnings:

  • merchandises can be good represented online ( unlike vesture )
  • merchandises are comparatively cheap so the possibility of jobs with bringing are a more acceptable hazard than for, say, electronic points
  • shoping Cadmium content in an offline store does non give superior information on the merchandise compared with on-line browse ( unlike books ) – many online sites offer superior chances to hear infusions than are available in shop
  • because of downloading, sing an offline shop is non the quickest manner to obtain music ( unlike about all other merchandises discussed )

No other retail sector has a challenge comparable to the ability to download, although it is realistic to expect that as engineering develops, peculiarly the integrating of place amusement media, this may go a important channel for obtaining movies and games and perchance, in the longer term, books.

It is clear from the analysis that music retail is peculiarly challenged by online channels, likely more so than any other market sector.

HMV’s current scheme may non take to important advantages in the long term. First, it has identified DVDs as a growing market, and is therefore increasing its focal point on them, yet it is realistic to anticipate tendencies in DVD purchase and download to follow those of music. Second, it wishes to concentrate on acquisition of smaller mercantile establishments in little to medium sized towns where it does non presently have a presence.

Harmonizing to Porter’s theories, the key to success is distinction from rivals. For the high street music store, this necessarily means a focal point on the retail experience for the consumer: it is the lone clear advantage it can offer over on-line buying. This might intend more sophisticated engineering in shop to enable consumers to research music through downloads or recommendations based on informations obtained through a trueness strategy, and events such as instore visual aspects and public presentations. The operating expense for this are significantly higher for a figure of little stores than for one big one, although the turnover may finally be the same. Smaller stores besides restrict the infinite available for unrecorded music instore and other experience-enhancing constructs.

The penchant of consumers for Cadmiums in front of digital files, defeat with download mutual exclusiveness and disfavor of the hold between telling and having a Cadmium from an on-line retail merchant all demonstrate that on-line music retail merchants, every bit good as high street shops, are confronting challenges.

In the influential articleScheme and the Internet( 2001 ) Porter warns of burying scheme in the face of Internet development and the altering commercial environment that accompanies it:

“…many have assumed that the Internet alterations everything, rendering all the old regulations about companies and competition obsolete. That may be a natural reaction, but it is a unsafe one” ( Porter 2001: 63 ) .

Five old ages after the article was written, some of its anticipations do non look to hold been realised. For illustration, Porter implies that clients utilizing Amazon.com are merely experimenting, and that many will seek it and return to offline shopping ( ibid: 64 ) , yet Amazon’s strength within the book and Cadmium markets suggests otherwise. On closer review, Amazon is differentiation-focused, with a more comprehensive synergistic component than other on-line retail merchants, and a more highly-developed system for recommendations. While other sites can copy these, Amazon is in a place to be proactive with its web site development instead than copying others, assisting it maintain a degree of distinction.

The challenge for the high street music retail merchant is peculiarly acute, and has possibly non been met every bit efficaciously as retail merchants in other sectors, such as bookstores concentrating on shopping experience and promoting browse, and apparels retail merchants constructing synergism through multiple, flexible operations.

For smaller independent music shops, puting up a web site to equal the online market leaders is impractical: the logistic

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