Shoppers Flock to Internet - So Why Build With Bricks and Mortar?

34% drop in high street spending
Originally uploaded by tescocampaign.

The Daily Telegraph is reporting that High Street shops suffered a whopping 34% dive in sales in January.

Shopkeepers have suffered their worst monthly slump in the value of goods sold since records began over 20 years ago, as hard-pressed consumers deserted the high street.

But internet retailers are fairing well:

Despite the misery faced by high street, the statistics also showed that internet retailers are recording the strongest growth on record. The non-store/repair sector, which is now largely dominated by internet retailers such as Amazon, saw its annual sales grow 17.7pc.

According to ThisIsMoney.co.uk and other leading financial news websites, Tesco leads the market for the sale of online groceries and has recently branched into other areas of online commerce, including selling furniture and toys online:

Tesco is set to hit £1bn in online sales for the first time. Internet sales are booming with a 28.7% rise in the first half of the year to a record £554m. Internet profits rose 43% to £33.8m. The growth is being driven by the company's Tesco.com service, which makes 220,000 grocery deliveries a week and has 750,000 regular customers...

You can't, of course, blame Tesco for being successful and certainly home delivery, which offers shoppers convenience whilst at the same time reducing the overheads normally required for bricks and mortar stores, is one of the keys to Tesco's booming online profits. ThisIsMoney.co.uk reports:

Demand has grown so fast that Tesco is trying out store locations that customers cannot physically visit and from which orders can be made online only. One has already been tested in Croydon where, the company says: 'It has been very successful, providing busy stores with more capacity to grow and freeing up a lot more convenient delivery slots for Tesco.com customers.'

Hey, that's a great idea. With internet penetration growing rapidly, ordering online is likely to continue to grow, making massive edge of centre stores entirely unnecessary. In fact, massive warehouse style stores are likely to be a white elephant in the future of UK grocery retailing. Why build, heat and light an edge of centre store on expensive land when you can build an inexpensive, more cost effective warehouse elsewhere (if you have to build at all)?

And perhaps we're in luck as Tesco's got just the man in place to tell them all this : Michael Kissman who, a year ago (late Feb 2006), wasn't working onTesco's planning and developments, but was providing quotes about Comedy DVDs sold on Tesco.com. Kissman told the BBC:

It's surprising the towns that don't seem to like comedy. For example, we have sold considerably less comedy DVDs in Windsor and Harrow - perhaps it's because they just don't need cheering up as much as other towns."

And in a press release posted on the marketing and PR site Response Source Kissman said:

"It seems people are turning to comedy to shake off the lingering winter blues."

With our unseasonably warm weather this winter, perhaps that's the key to Tesco's entirely inappropriate plans for the Evershed site in St. Albans - if people don't have lingering winter blues to get over by purchasing DVDs online, then perhaps Tesco development blues will kick start a comedy DVD sales frenzy...

NOW we get it.

Joking and the issue of market dominance left aside for a moment, one has to wonder why the clever people at Tesco would want to build a bricks and mortar store at the exact moment when its' own online retailing business is moving from strength to strength and - based on The Daily Telegraph article reporting a 34% drop in high street spending in January - internet shopping is thought to be dramatically eroding high street sales.

Allowing Tesco to build a soon to be obsolete superstore on such a prime edge of centre site not only could harm the trade of local businesses and our thousand year market, it's a move that's unlikely to make much sense to Tesco's shareholders in the medium to long-term.