Big brands (must) go online

The global economy, with or without pandemic, has substantially changed over the past 10 to 20 years. I still remember the times when I needed to convince my clients to have a website in the early 2000. Less than a decade later I had to insist for them to have social media accounts. Then again, 5 to 8 years ago, I was advocating for them to begin selling online both goods and services. The market responds slowly to significant trends, we know that, but now that it is established how essential it is to be present online, those companies who are too slow at adapting, face serious consequences, regardless of their size. During the Autum of 2017, the toys distributor Toys“R”Us, Inc. officially filed for Chapter 11 bankruptcy in the USA, in order to give it flexibility to deal with a whooping $5 billion in long-term debt, borrowing $2 billion so it could pay suppliers for the upcoming holiday season and invest in improving current operations. Only 6 months later the company announced that the plan did not work and most of the physical shops were to be closed. The case of Toys“R”Us is an emblematic example of incapacity to adapt to new trends. While consumers throughout the world began buying online regularly, Toys“R”Us’ pinnacle of innovation was a mobile app to collect points on purchases. Something that was fashionable a decade earlier. So with fewer offline revenues, the cost of maintaining the cumbersome real estate, sank the ship. In the past weeks, another giant, the British textile firm TopShop, operating in some of the largest countries in the world, has announced to close down all the outlets in Singapore, one of the most expensive markets for retail rental. As a result, TopShop has kept an online-only presence in Singapore, and rumors are indicating that other countries might follow suit. The company was founded in 1978 and failed to adapt to the evolving market, maintaining an offline-first approach throughout. However, for a large offline retailer, it is not so easy to simply jump ship and go fully offline. Selling online presents challenges that offline are minimised or do not exist at all. For instance, offline retailers require few large shipments to their stores, and when moving to fully online stores, the logistics model changes completely. Customer service is also completely different. There is no need for uniforms and grooming, but the ability to communicate promptly and efficiently is much more in demand for onliners than for offliners. Another issue lies with the management of returns and refunds. If the retailer relies on third party platforms for their distribution, then it must adhere to the marketplace’s guidelines, in exchange for higher visibility. Such opportunity comes with much tougher competition, as the competitor’s products might be displayed right on the same page. On the other hand, if the retailer establishes presence through a dedicated website, then the biggest hurdle is to grow traffic, either organically or through the many marketing tools (paid traffic). The COVID-19 pandemic has emphasised and accelerated the possible decline of offline retailers. In the next few quarters, some other giant might fall.   stefano virgilli stefano@virgilli.com