Town centre management, the “Digital Divide” and high streets in crisis.

I wrote this just over a year ago. Having since been intricately involved in the Digital High Streets 2020 Report to the Future High Streets Forum and DCLG, it was interesting to re-read this.

Town centre management, the “Digital Divide” and high streets in crisis.

Introduction

It is well observed that the digital high street has become a part of our daily lives through the rapid uptake of online and mobile engagement. As citizen-consumers, we have become the drivers of change across town and city centres, not only in the commercial High Streets, but also beyond the retail threshold and into the broader experience.

Plenty of credible sources have reached consensus on a number of facets of the digital high street and how it is now a part of the multi-channel experience for most people.

  • modern consumer expectations centred on experience, convenience, choice, authenticity and value
  • the broad business re-focus on the consumer experience and not the technology
  • the evolving business model of omni-channel consumer engagement
  • growing understanding of the potential economic benefits of increased digitisation
  • changing patterns of retail, service and hospitality due to online and mobile
  • reduction in number and size of retail premises
  • new occupiers, new uses including e-retailers and non-retail

“Consumers, used to the immersive online shopping experience, will look for similar [experiential and functional] touch-points in the physical high street environment. The future high street experience will thus become more than a retail channel – instead retailers, high street and area services will partner and creatively link to provide a one-stop shop for consumer interaction.” (1)

Mary Portas, in her May 2014 paper “Why Our High Streets Still Matter”, says “The idea of “en route” shopping mentioned in a BBC report (2)sees the combination of digital, mobile and bricks & mortar playing a more intertwined relationship – and the High Street as a convenient connection point.”

“The High Street is likely to survive only for as long as consumers enjoy the town centre customer experience.” (3)

“Retailers that are insufficiently represented on the Internet and are unable to differentiate themselves from the competition in price, range of products or services are finding it increasingly difficult to make a profit. This holds for both chain retailers and independents.” (4)

Key transformational themes emerge from this wealth of observation and data, including:

  1. Businesses must achieve physical and virtual melding of high street offer
  2. Establishing uniform and integrated consumer experience
  3. Smart City potential to improve the consumer experience of the high street
  4. Adaptation needed in uses of town centre property, due to new user types (e-retailers, community groups, non-retail)

With these themes identified, surely the future of the high street is secured?

Or does potential crisis still loom large?

This thought piece presents the viewpoint that a lack of knowledge about how to engage with the digitally experienced modern consumer is the biggest threat to the High Street.

Low levels of digital inclusion and skills, coupled with the lack of a uniform consumer digital experience, are major factors in the “Digital Divide” and pose a key barrier to addressing key themes 1-4 above.

“Only half of small businesses and charities have a website. Of those who do, only 1 in 5 allow customers to purchase goods/services or donate online from their site. A third of business and charities believe that being online is not relevant for them.”  (5)

The Digital Divide – the major barrier to High Street evolution

  1. Digital Divide in local government

Access technologies: Local government faces digital infrastructure challenges in physical access technologies. In order to support economic, social and community development, local authorities have a responsibility to facilitate online and mobile connectivity by interacting with the major internet service providers (ISPs) and mobile network operators (MNOs).

The local government challenge is that they are usually required to enable local or EU co-investment in this critical infrastructure expansion at a time when fiscal policy is reducing their operating resources, thus often placing the burden on the ISPs and MNOs to provide the necessary investment. This results in an uneven distribution of access technologies as the commercial providers focus on the areas that have sufficient demand to make a viable commercial proposition. The central government intervention in superfast broadband rollout was their response to a supposed market failure to deliver access technologies uniformly across the UK. Further intervention may be necessary.

The knock-on impact of reduced amounts of high-speed connectivity are felt in town and city centres, as businesses and consumers alike have online and mobile experiences that do not meet the increasingly higher expectations  of users, all looking for that seamless and convenient connectivity. For the High Street, this slows down the pace at which retailers can develop their multi-channel business models. For consumers, it makes the destination shopping centres seem more attractive than the local high street, as there is likely to offer a better online and mobile experience.

Missing data-sets: In the ATCM Experian report “Town Centre Futures  (6)“…. ‘filling this knowledge gap’ is regarded as a primary means to develop effective town centre management strategies. The North West and East [town]teams stressed that a lack of town centre customer data, whether held by management teams or independent retailers is a significant problem, ensuring an inability to match offers to local demand, or indeed engage with target consumers at all.”

Smart city practices have been evolving in recent years alongside the broader digital economy. Forward-thinking leaders recognize that although tight budgets, scarce resources and legacy systems frequently challenge their goals, new and innovative technologies can help turn challenges into opportunities. These leaders see transformative possibilities in using big data and analytics for deeper insights.  (7)

  • Cloud-based services for collaboration among disparate agencies.
  • Mobile to gather data and address problems directly at the source.
  • Social technologies for better engagement with citizens.

The challenge to local government is that there is a disconnect between their own service-derived data-sets and the data-sets that could be available from their high streets. As a significant majority of smaller businesses are not making optimal use of digital technologies, their local consumer-related data is usually not available to contribute to the smart city local management process, and thus the High Street may not receive direct benefit from the intelligent application of local data in managing systems such as traffic management, transport information and scheduling, digital and utility infrastructure investment.

  1. Digital Divide in town centre management and partnerships

Digital skills gap: The Association of Town and City Management (ATCM) has approximately 600 practitioner members and over 300 Town Teams across the UK. During 2012-2014 at regular regional meetings, it was established that there is confusion regarding procurement and use of digital services based on a lack of knowledge about the new technologies.

Most town centre partnerships and Business Improvement Districts (BIDs) have business plans to deliver on behalf of their business stakeholders that include an expectation of destination marketing. The use of websites, mobile apps and basic local loyalty schemes is well established, although there is an uneven distribution of digital marketing skills, with smaller localities often at a disadvantage due to budgetary and skills shortage. However, most partnerships and BIDs do not yet have the necessary advanced and specialist skills to deliver the types of digital marketing and interactive mobile platforms that the national multiple retailers use as part of their multi-channel  customer engagement, and that the consumer is used to interacting with.

Digital deserts: This lack of digital capability in town centre marketing has the added impact of frustrating consumers and falling short of a set of expectations shaped by their multi-channel experiences with the major brands and retailers, and their on-line shopping activity. Consumers access whatever local online and digital content that is available; if it does not include content from smaller businesses, local information and amenities, and from community groups, they are likely to favour larger regional hub destinations with a more sophisticated, even interactive online presence. A town centre that does not have regular online and social content from SMEs and other sources beyond the major brands and retailers may seem like a “digital desert” to the modern consumer. For town centre management, being on the wrong side of the Digital Divide has a negative impact on overall performance; by not being able to engage fully with the potential customer base in the retail catchment area, shoppers may head elsewhere in search of a “digital oasis”.

Courting e-businesses: Town centre partnerships play a role in local economic development through business retention and expansion. With the changing nature of retail property needs, many of the multiples are now needing less square footage than before, however there has been a shift in types of businesses occupying high street premises. This has raised the issue of change of use planning applications.

However, putting aside the challenges often posed by inflexibility in planning regulations regarding change of use, town centre management faces another “Digital Divide” challenge brought on by new retailing patterns that has recently become an issue. Click and Collect is by now a well-known phenomenon that has emerged as part of the multi-channel retail business model; it is often associated with the larger retailers and the “pure-play” online e-retailers. It has become a high-growth factor

However, there is a large volume of micro-businesses that are e-retailers, as evidenced by the 100% growth of UK eBay transactions since 2008, according to UK e-retail association IMRG. (8)These e-retail businesses are starting to feel the need for high street presence. In some cases the need is for a permanent shop, but it is more normal for these agile and digitally capable entrepreneurs to look for a pop-up opportunity. Pop Up Britain is one of a handful of facilitators of this type of space; one of the characteristics of their SME client base is that most of them are already trading online. In London’s tech-savvy Shoreditch, the Boxpark Shoreditch is a “meanwhile-use” pop-up mall sited on a 2-acre plot owned by a major developer seeking planning consent. The complex of black painted shipping containers houses a mix of trendy independents, bars, cafes and a few brand names such as Nike and Gap who are doing some brand experimentation; many of the smaller traders started up online and using social media before taking on a space. Town centre management needs to understand the digital infrastructure and marketing support needs of this new breed of entrepreneur if they are to attract them to town centre premises.

  1. Digital Divide in High Street SMEs and smaller multiples

Significance of SMEs in high street:   SMEs can unlock an additional £18.8bn of incremental revenue growth by optimising their use of digital technologies, according to Go On UK, the UK’s digital skills alliance. (9)

Digital skills gap: The Lloyds Bank UK Digital Index report looks at digital skills deficiencies and uses a gauge of digital maturity to indicate the need for greater uptake. “Over 1.9m organisations have a medium level of digital maturity – they may have a basic social media presence, use simple e-commerce tools or carry out some but not all banking transactions online. Almost  1.7m organisations have a very low level of digital understanding and capability – many make no use of the internet at all and do not have any web or social media presence…..UK’s SMEs and charities have an urgent need for a deeper understanding of the ‘art of the possible’ in the digital domain.” (10)

In addition, in March 2014, ATCM and the National Skills Academy for Retail launched a practical digital skills programme for retail SMEs. (11) This has started to gather some momentum, however it is clear that more support is needed in order to get SMEs to undertake skills training. The early stages of this programme have given a clear indication of the breadth of the “Digital Divide”.

Attitudes and the use of digital

Drawing further from the Lloyds Bank work, “The primary reason why SMEs are not taking practical steps to do more online are attitudinal… We also found that the internet isn’t being optimised by organisations. Only half of SMEs had a website and for those who do, nearly all provided company information and over three quarters provided product or service information. But after that, more sophisticated functionality is limited with only 1 in 5 allowing payments/donations from customers or donors from their site. 11% said they did not use or had no access to the internet at all.”

This is also showing the need for greater support in explaining the merits of digital skills and getting SME engagement. Being the wrong side of the “Digital Divide” is obviously causing small retailers to under-perform, as their customers increasingly use online and mobile channels within their individual customer journey. In June 2014, the number of smartphone owners has reached 72 per cent in the UK, growing by 14 per cent in the last 10 months alone, according to research from Deloitte. (12) Clearly, mobile will be a critical channel for all retailers to engage with, using social media and responsive website design.

The lack of basic digital skills by many smaller high street businesses stops them developing more advanced skills. The lack of advanced skills prohibits smaller retailers using the emerging new digital services, and thereby meeting consumer expectations and performing optimally as businesses in an omni-channel high street.

By not being able to combine their physical and virtual potential, town centre management and their smaller business stakeholders are not able to make use of collaborative data sets, they do not know how to participate effectively in collective marketing, nor position their offer on the consumer-facing platforms that are emerging from the digital service providers sector.

The likely direction of travel for the Digital High Street

Key words – mobile and local: Understanding mobile is key to local high street success. The GSMA is a global trade association representing 800 mobile network operators. Their London office houses the innovative and world-wide sector-leading programme on mobile commerce.  “Mobile is also playing a massive part in this process of customers finding shopping and leisure information. Google has recently indicated that one in three US mobile queries is now ‘local’ and 87% of people use their phone when on the go. Google also found that 95% of mobile users look up local information on their phones and the primary functions are calling or visiting a business.” (13)

“Local search engine optimisation (SEO) has grown significantly over the last few years, particularly given the rise of smartphone usage and better connectivity while out and about. Although it has a lot of similarities with organic SEO, it’s ultimately very different. Local SEO is focused on providing results that are relevant to a searcher based on their current location. If I search for ‘best steak restaurant’ on my desktop right now, Google would provide me with results that are nearest to me.”

Conclusions

Greater awareness is needed of the risk of non-engagement needed by SMEs by local authorities, LEPs and town centre management partnerships; digital maturity amongst SMEs should be a high priority; digital inclusion and provision of skills training opportunities efforts need to be better coordinated between trade bodies and other non-profit organisations.

The absence of a uniform and integrated consumer high street experience favours on-line growth; current development work by key associations and trade bodies is closing in on the set of technical standards and specifications necessary for this to happen.

Bridging the “Digital Divide” – key recommendations

  1. Expand SME retail digital maturity through increased support of digital skills training
  2. Establish as a benchmark the use of collective marketing and online-mobile platforms
  1. (Beyond 2020 Retail, Future Foundation and BRC)
  2. http://www.bbc.co.uk/news/business-26849833
  3. (ESRC/Loughborough University – The Customer Experience of Town Centres)
  4. (Weltevreden JWJ. The Evolution of Online Shopping in the Netherlands. Amsterdam: HvA Publicaties; 2012.)
  5. (Lloyds Bank UK Business Digital Index Report 2014) http://businesshelp.lloydsbankbusiness.com/downloads/LB_UK_Business_Digital_Index_31_03_14.pdf
  6. ATCM Experian report “Town Centre Futures
  7. IBM- Smarter Cities http://www.ibm.com/smarterplanet/uk/en/smarter_cities/perspectives/
  8. http://www.imrg.org/a-tale-of-two-cities-competition-or-collaboration-between-e-commerce-and-the-high-street-
  9. http://www.go-on.co.uk/category/research/ http://businesshelp.lloydsbankbusiness.com/downloads/LB_UK_Business_Digital_Index_31_03_14.pdf
  10. (Lloyds Bank UK Business Digital Index Report 2014)
  11. http://www.digitalhighstreetskills.co.uk/
  12. https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Technology-Media-Telecommunications/dttl_TMT-GMCS_January%202014.pdf
  13. GSMA white paper Mobile Commerce in Retail:Loyalty and Couponing, JANUARY 2014 http://www.gsma.com/digitalcommerce/wp-content/uploads/2013/10/Mobile-Commerce-in-Retail-Voucher-and-Couponing-White-Paper-FINAL.pdf

 Author: Guy Douglas

Digital High Street Programme Manager, Association of Town and City Management

{ Now with Connected Places UK, as Digital economy consultant }

Email:

guy.douglas@atcm.org

guydoug@live.co.uk

Phone:

01984 667723

07592 304811

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