There's a retail revival, but what does the future hold?
PUBLISHED: 16:34 21 April 2015 | UPDATED: 16:34 21 April 2015
The High Street is changing. We talked to Antonia Shield, partner at BPE about the future of retail
Retailers have finally woken up to the critical importance of multi-channel retailing. For those entrepreneurial retailers which embraced the online opportunities early, such as John Lewis, it will certainly help future proof their financial health, though perhaps not significantly enhance profit margin as yet because of the large costs involved. Such are the high costs of logistics it may sometimes seem to a beleaguered retailer that it would make more sense DHL selling frocks online than a fashion retailer trying to build a robust and cost effective distribution system. While logistics are improving to deal with order fulfillment, there is also the issue of returns which requires retailers to look at how to structure their warehousing locations.
The main results of this evolution across the retailing sector include vastly improved and easy websites structured to perform on smartphones, tablets and conventional computers as well as the emergence of numerous dedicated apps allowing us to shop 24/7 at the most competitive prices for generic product.
More problematic for the high street itself faced with filling growing voids, is the reduction in the size of a retailer’s store portfolio, and careful analysis of the purpose of any given store before it commits to opening on high streets and in shopping centres in less desirable locations.
Faster delivery is also boosting retail. It has to, in an age where as consumers we want it ALL and we want it NOW.
Remember the 1980s, when Next, led by one of the UK’s most successful retailers George Davies (read about him on the previous pages), introduced 48-hour mail order delivery, which seemed incredible at the time? Now there is next day delivery, or even delivery within two hours if you live in some of the UK’s biggest urban areas.
John Lewis’ ‘click and collect’ via any of its stores, or food stores, is really attractive to those well served by Waitrose (especially here in the Cotswolds), although it can be rather odd to swing by Waitrose’s customer services desk during to collect high fashion items bought on-line. This concept of availability has been further extended by Amazon and others establishing their own locker locations to facilitate collection in transport terminals and entering into tie ups with local community retailers.
Such developments make online retailing for needs-based purchases a reality. Products that would otherwise have been part of a weekend shopping list, or initiated a quick drop into the local high street midweek, no longer have to be bought this way.
Retailers are making it as easy as possible for us to get used to this culture, and the ability to set up recurrent deliveries for regular consumables is potentially amazing, although I think the supermarkets are missing a trick by not offering this at the moment. Time and convenience are the key issues that will manipulate this market.
So where does a retailer’s store portfolio fit into this Brave New World. And where does it leave the high street?
Out of town developments, which destroyed the high street food offer, the rising impact of the internet and the recent recession, has delivered a real kicking to our much-loved and unique British high street. Footfall has disappeared. Traditional high street operators have no choice but to shrink their portfolios. This has also created a problem for the property investment industry generally (not helped by empty rates payment requirements which has proliferated many a charity shop parade). There has to be an acknowledgement that some high streets simply will not recover and a change in planning approach and incentives to regenerate as residential are likely to be needed. In some other areas, town councils need to work hard to allow true convenience to establish which may be the only answer. Rather than treat the car as the
enemy of town centres, acknowledge that people just aren’t going to abandon them, get rid of parking charges (but enforce time limits), remove pedestrian only areas and create shared spaces. Make their high street somewhere people can pop to easily.
It is that or creating a destination. While we are lucky in the Cotswolds with the enduring appeal of the architecture and environment of Cirencester and other local towns all week, the attraction of the Saturday Farmers’ Market in Stroud and the regular Moretonin-Marsh weekly markets, there are hundreds of other towns countrywide that simply do not and will never have that appeal.
Successful, non-food retailers must consider their store strategy carefully, and use it to maximise brand impact as well as sales. The old fashioned driver of shop numbers for a retailer will give way to prioritising the enforcement of a retailer’s brand. It’s called ‘showrooming’: using a retail location to showcase a brand while not expecting retail sales to match the rent, business rates and payment of employees.
How that is developed, sustained, grown and manipulated around the retailer’s product will be key. One of the key issues we have already seen for some brands is the desire for larger format stores, which cannot be accommodated in a traditional high street environment or even in some of the older shopping centres.
There are already fewer stores, and will be fewer retail destinations as a consequence, but a very much enhanced experience as high streets encourage more coffee shops, bars and restaurants to boost what is already happening: turning shopping into a leisure activity.
For any new brand, trying to achieve brand awareness through the internet is tricky. However navigating the pitfalls of the right location for your first few stores is potentially going to be make or break, with the added costs of opening and running it: fit outs, more employees, rates, rents, service charges etc. The challenges are immense and professional advice is undoubtedly going to pay dividends in the long run.
Flexibility should be a first priority, and trialling a brand through pop-ups and on increasingly flexible lease terms will be helpful to kick off.
Who is the new customer? The amazing thing is that online retailing has opened up retailing to a younger audience, but also an older one too. It gives those not in London exposure to brands only sold in the capital, and in the coolest continental cities, and kids exposure to ‘fast’ fashion as it evolves in real time. It gives the older generation the opportunity to obtain goods they might have had difficulty getting 20 years ago.
Research suggests that the internet has also opened up retail to men in a much more inclusive way than ever before.
This is a huge opportunity for retailing. It is anticipated that the population will remain static over the next 10 years but as we live longer there will be a greater proportion of retired people who will be online savvy, though whether they have spending power remains to be seen.
Perhaps less so than their current ‘silver surfing’ parents, but that’s another issue. Retailing will need to adapt to and target these consumer groups specifically.
They will have very different priorities in what and where they want their retail experience to be for their needs based consumable purchases and long term and luxury purchases.
This interview is from the May 2015 issue of Business & Professional Life