The Second Challenge Discussed Is of Supply Chain

The second challenge discussed is of supply chain (global internet retailers).

DVD and CD high-street selling specialist HMV, which had faced intense competition from online retailers went into administration in January 2013 (Huffington post, 2013). This ‘big name' in UK high-street shopping is a victim of a growing trend towards online purchasing from companies that makes use of global supply chains (bbc.co.uk, 2010). In January 2014, the British Retail Consortium (BRC) reported 19% growth in internet purchases from 2012, the fastest increase in four years. This is in contrast to the Dailymail's reports in the same period which said there was a significant downturn in high-street sales- down 13%, and the worst trading period since July 1992 (the middle of the last recession).

Where goods are homogenous and have marginal price points, Dor (2004) argues that consumers are more likely to buy these goods from the cheapest source. The telegraph published a study in 2012 that showed the UK in particular being the biggest online purchaser in the developed world, with Amazon cited as the top online retailer. One of the main threats to local companies that global retail chains have against the high-street is the lack of fixed overhead costs. However, according to Forbes (2013), a sizable chunk of the margin derived from the big online retailers are from their ability to avoid paying local tax rates by setting up in off-shore tax havens (Kapoor, 2004). That is the case of Amazon- HMV's biggest rival who at least up until HMV closed was operating in a relatively tax-free haven (BBC, 2013). Correspondent analysts from the BBC in 2012 predicted HMV going into administration because HMV was not able to build an online presence quickly enough to transition into an online-only retailer and cut their fixed overheads down. Given their supply chain, it was said to be one of the few options available to them to prevent the