Bricks vs clicks: the future of the high street in the internet age
Read time : 7 mins Added: 07/01/2019
With declining high street footfall, small businesses have been casualties in the shift to online shopping. But the internet is also key to small firms staying competitive.
The demise of big names like BHS, Poundworld and Toys R Us is part of a phenomenon that saw an average of 16 high street stores closing every day in 2017. If large companies are floundering, then how do small businesses survive and thrive in the current climate? The answer may well lie in digitally upskilling your business.
"One of the biggest challenges affecting all businesses is the increasing importance of building an online presence and adapting to a digital age,"
Nick Williams, Managing Director, Consumer & Commercial Digital, Lloyds Bank
Digital means stronger competition. It pays no respect to geographical boundaries, so there is nothing to stop someone from another part of the country or overseas from trading on what was previously local territory. By the same token, it also offers businesses huge opportunities to expand their customer base. However, 1.7 million small businesses lack the basic digital skills they need to seize these opportunities.
"One of the biggest challenges affecting all businesses is the increasing importance of building an online presence and adapting to a digital age," says Nick Williams, Managing Director, Consumer & Commercial Digital, Lloyds Banking Group.
"We’ve seen headlines about businesses failing because they’re not able to adapt quickly enough to these changes – but there are also some great examples of where businesses have succeeded through digital."
The advantages of increasing digital capability are clear. The 2018 Lloyds Bank Business Digital Index shows that small businesses with a website, Instagram and Facebook page have a £77,000 higher annual turnover than those without.
Plus, businesses are five times more likely to see cost savings from being online, as well as saving almost 21% of their working week in time efficiencies. In fact, it’s estimated that if all the UK’s SMEs were to go from low to high digital capability, this could unlock up to an additional £84.5 billion turnover.
Barriers to digital adoption
Despite the benefits offered by digital, some small businesses are not seizing the opportunities.
For example, the Business Digital Index shows a 5% fall in service sector organisations achieving full basic digital skills, meaning they may be missing out on back office efficiencies and digital marketing, as well as selling their services online.
So what’s standing in the way of businesses getting involved in digital? Over a quarter – 26% – of small businesses admit that they do not believe digital is relevant to them.
"There are attitudinal and motivational blockers," says Nick Williams. "The idea that ‘I don’t understand digital and I don’t need it’. We’ve got to break through that and educate people about the opportunities they have and the risks they face."
Skills and time are other barriers, as is cost, as digital constantly moves forward. Even when business are online, having the capability to keep up with changes is an issue: for example, only 18% of businesses have mobile-optimised websites.
Another factor is that the political and economic climate is one of uncertainty. Because of this, businesses may feel they want to delay decisions on investing in digital capability until the economic picture is clearer. However, this could mean they miss out on opportunities.
"Despite the uncertainty we face in the UK economy, one thing is for certain: our customers are online today and they are going to continue to be more digitally active," says Nick Williams.
"We want to make sure that the right solutions and services are there to support small businesses in making these decisions rather than waiting."
Having a website is becoming an essential for high street businesses. It acts as a storefront, giving you the chance to attract some of the millions of potential customers browsing online. Plus, you can capitalise on the data gleaned from your online presence to get a better understanding of your customers and improve your offering.
"The importance of data-driven decision making can’t be emphasised enough," says Nick Williams. “It is a hugely valuable source of information that helps you to know your customers.
"But 83% of small businesses are not using analytics to improve website performance and the majority of businesses – 58% – are not tailoring their products and services to meet customer needs by harnessing online feedback."
Social media is another powerful tool for telling your brand story and with 39 million users in the UK, can hugely expand your reach. Advertising on social media allows you to finely target your audience and easily measure the effectiveness of your ads for a very small proportion of what traditional advertising would cost.
However, actually transacting online is a route some businesses may be reluctant to go down, not least because of security fears.
"Fraud and security presents a significant concern and barrier for small businesses," says Nick Williams. “More than a quarter of businesses say they don’t understand what cyber security really is. It is one of the major barriers for small businesses to having a stronger footprint online.
"We as a bank work hard to try to guide small businesses to a multitude of partners who can provide software and tools to give them the basic defences they need around their websites."
Not every business has to be on every digital platform, as Wetherspoon’s decision to quit social media shows. And when it comes to selling online, some businesses may want to sell via the large online retailers such as Amazon and eBay, or at least use them to test the market for their products.
There are also sites specifically geared towards small high street businesses. Trouva.com is a prime example of this. The website brings together independent high street businesses, enabling customers to discover products from all over the UK. It also promotes visits to the independents’ bricks and mortar outlets by publishing city guides for visitors.
While going up against larger businesses may be intimidating, being a small high street business offers some advantages. Smaller organisations generally have greater agility and shorter supply chains. It’s also easier for them to make quick decisions.
"Small businesses are able to repoint their resources into what really matters for them," says Nick Williams. "They don’t necessarily have the bureaucracy that sits in larger organisations around making decisions about investment, product and lines."
Furthermore, the profile of small businesses is changing. "Most new start-ups now are digitally born," Nick Williams explains. "They may be providing physical goods or services, but they start with a digital mindset. Younger organisations start from an advantage of not having legacy to deal with, whether that’s legacy infrastructure or legacy mindset."
While the world is becoming increasingly digital, the high street still has a role to play.
"There will always be a place for personal interaction," says Nick Williams. "Businesses will likely have an element of both in their service model. For example, bricks and mortar businesses are harnessing digital tools, like mobile-based loyalty programmes to succeed.
"High street businesses can also place far more emphasis on a customers’ shopping experience. This is a great opportunity to build meaningful relationships with customers, brand advocacy and repeat business."
At Lloyds Bank, we’re passionate about making sure no one is left behind. We’re working with Government and partnerships on initiatives to help build small businesses’ digital confidence and capability.
Initiatives include our network of Digital Champions volunteers who can help businesses who come into branches, and our support of the Digital Knowhow Workshop programme which helps charities and businesses improve their digital skills.
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