Downturn speeding up revolution in the way we shop

 

Whether start-ups or venerable firms, companies who adapt to online commerce will survive, writes DAMIAN LAWLOR.

THE GLOBAL slowdown is hitting almost every part of every economy. But it’s also clear that this recession is different from those of the past. Speed, not size or strength, is now the key to survival.

The businesses succeeding are those, whatever their size or longevity, displaying the same hunger and agility as the smallest start-up.

It is the companies that ignore trends such as technological advances and shifts in customer behaviour that are finding their markets eaten into by nimbler, hungrier rivals.

We are in the middle of the first serious slowdown of the digital age and this has changed the rules.

Nowhere is this clearer than in the contrasting fortunes of the old high street and those businesses, young and old, which have wisely invested in their online operations.

While bricks-and-mortar shops across the board are reporting their worst sale figures for a decade, online sales have not only held up but continue to rise. There is a revolution under way in how we shop – a revolution that the global downturn is only speeding up.

Those who think e-tailing is still a marginal activity undertaken by a small section of the population should think again. According to market research firm iReach, physical goods to the value of €300 million were purchased online in Ireland in 2008 and online transactions (including travel, financial products and gambling but excluding online banking) totalled a staggering €2.5 billion that year.

And these figures take no account of the web’s profound influence on spending decisions.

Many more purchases, from cars to video games, from holidays to meals, are researched online, with prices compared and customer and expert reviews checked, before they are bought in person.

In fact, for the first time ever, the internet has eclipsed friends and family as the top source of direct purchasing advice (50 per cent versus 49 per cent) in Ireland, says iReach.

It is no coincidence that the sharp rise in e-tailing is also happening at a time when Ireland – finally – is getting its broadband act together.

Ireland has more than 1.2 million broadband subscribers and the Government-backed National Broadband Scheme should provide the remaining population with broadband services before very long.

However, Ireland’s level of online commerce and online advertising still clearly lags behind other European countries with higher broadband penetration which makes the recent refusal by Eircom to commit to investing in ultra-high-speed fixed-line broadband all the more regrettable, particularly as broadband is recognised as a key driver of economic activity both on and off line.

However, the national broadband scheme will help bridge the current urban-rural broadband divide and it is against this backdrop that businesses that have recognised the opportunities the internet presents are prospering.

They don’t fit into any single category of age or size. It is speed and attitude of mind that count. In the new digital age, it is not survival of the fittest but of the fastest we are seeing.

These can be long-established businesses such as Ryanair, Marks Spencer or Argos, which have developed strong internet arms, or new firms which have prospered by identifying gaps in the market.

Here in Ireland, businesses such as computer retailer Elara.ie have used the internet to drive revenues and reach legions of new customers. In 2008, the e-tailer’s revenue grew 38 per cent and its traffic by 56 per cent compared with the previous year. Sales for Christmas 2008 were up 45 per cent on 2007.

Online car parts and accessories retailer MicksGarage has also been enjoying a sales boom that most high-street businesses could only dream of. The five-year-old firm experienced revenue growth of 42 per cent in 2008 – including a 77 per cent surge in Christmas trade versus the year before – while traffic to the website grew by 81.5 per cent year-on-year.

When MicksGarage recently asked its customers why they used the website, price and convenience were the two top reasons given.

Convenience not only referred to the fact that customers could make their purchases from home, work or wherever else, but also that they could have a product delivered the next working day anywhere in the country.

And price? Well, in a recession-hit economy price speaks for itself.

It is similar entrepreneurial spirit combined with enabling technology that will, in my view, lead the economy out of recession. I don’t downplay the part that Government must play in helping to unblock the flow in credit and in stimulating the economy. But the best we can hope is that such intervention will help stabilise the financial system, stop confidence draining away and provide some temporary breathing space. It can’t pull us out of the downturn.

This is the task of entrepreneurs and the well-run, adaptable companies that stay focused on the changing needs of their customers and are themselves ready to change to meet them. Economic difficulties have in the past provided a platform for an explosion of entrepreneurship. I have no doubt this will happen again.

Across every sector, technological advances are opening up new opportunities and driving down costs. Modest investment now in cloud computing, for example, offers big savings for business right across their operations. Targeted advertising through the web allows potential customers to be targeted when they are making spending decisions and enables costs to be controlled.

We have already seen how willing consumers are to embrace the digital age. It is up to businesses to respond in kind by quickly grasping the opportunities presented by the internet.

Those that don’t take this step risk going the way of the dinosaur. But the ones that are adaptable and open to new ways of doing business will be around for the long haul.



Damian Lawlor is director of online publishing at Google for Europe, the Middle East and Africa