The high street is decaying across the UK. The recession of 2008 was the last macro-catalyst to speed up the closing of businesses across the country, leaving one in seven of our shops boarded up and vacant. The government’s latest push to offer these spaces up as housing is just one of the initiatives to fight back against this. However, the bill doesn’t address the livelihoods and jobs of the 2.8 million people estimated to be employed by the retail sector in the UK alone.
Are these people going to be able to find alternative employment in the UK? How can retailers adapt to this changing environment? And most importantly, what will the future of retail look like? Before attempting to answer these questions, let’s look at how exactly we ended up here…
A step back in time
The popularity of the high street grew substantially until the early 1970’s, around the same time as the maturity of the first supermarkets. The convenience offered by these locations along with an amplified rate of urbanisation meant people were shopping close to where they lived. But then increased rates, chock-a-block town planning and the increase of car ownership pushed traditional high street retailers to out-of-town locations. These were larger format stores, located close to expansive parking and major roads. They offered customers a wider range of products and recognisable national brands that customers trusted, rather than independent stores and products. This was the first sign that times were changing.
The knock-on effect on neighbouring businesses of a harsh business environment meant the number of vacancies soared – an increase from 7.5% to 14.5% between 2000 and 2009. Disruption therefore was happening long before the growth of Amazon, eBay and the other online giants (although their arrival certainly didn’t help).
With the growth of internet retailing, customers are now offered direct access to a limitless range of products at any time, which has provided the kind of choice and selection that many physical retailers have still not successfully harnessed. The price comparative nature of the online channel and mobile allowing for it to develop in maturity has caused the closure of many brands – Maplin and Toys R Us being the latest.
It’s easy to give a state of the nation, but the two big questions we face now are: what areas should retailers focus on to stay relevant? And, what does this mean for the future of physical retail?
The first does not have a straightforward answer. We know that range, price and location have always been fundamental factors for retailers but there has been a necessary shift to focus on disruptive innovation, unbeatable service and creating a destination store; all to build and strengthen a company’s brand.
The rapid growth of in-store experiences as a means of attracting consumers through the door is a trend that isn’t likely to slow down any time soon. In fact, 3 in 4 millennials would now spend money on a desirable experience or event over buying a product. With this is mind, companies such as Topshop have established concession pop-ups to keep their brand fresh. John Lewis has also dedicated one fifth of their Oxford Street store to experience and service.
“3 in 4 millennials would now spend money on a desirable experience or event over buying a product.”
It has become clear then that for physical retailers to survive, they must offer a service to accompany their products. Considering that 70% of buying experiences are based on how a customer feels they’re being treated, and with poor customer service having twice the impact than good, it is no surprise the better retailers are taking this seriously.
The focus on customer service and engagement is also being demonstrated by shops offering both physical and human interaction, for example digital pure play retailers that are moving from ‘clicks to bricks’ in order to bring their products closer to the hands of customers. More specifically physical bookstores have seen a 26% increase since 2013 and the card industry (many of which can be found on the high street) still employs 100,000 people. Although these are often more expensive than their online counterparts they offer a level of engagement still not found through a digital means. In the physical world, we will continue to see specialised retailers like Hotel Chocolat and Lush Cosmetics grow if they maintain the differentiator of excellent in-store customer service.
We have also seen a huge change in the way people pay for products. With consumers becoming increasingly time poor, this has been a focal point for many retailers when it comes to improving the customer experience. Today, 80% of customers are not prepared to wait longer than five minutes to pay which means increased basket abandonment and dissatisfied people leaving the store empty handed if their orders cannot be processed in time.
Solutions like those provided by challenger banks, Revolut and Monzo, are truly disrupting payments, specifically international payments, by reducing the barriers to entry when abroad. This, coupled with the convenience offered by Apple Pay (now at over 50% of contactless terminals in the UK), has made the payment process quicker than ever. The advances in this area has led to companies such as Starbucks allowing customers to place their orders ahead of time, track rewards, and benefit from discounts all in one application. The retail industry will need to ensure to stay ahead of the curve.
…To ensure it stays ahead…
What does this all mean for our stores then? The first thing is to reimagine the current store format. There will be growth in the concession model where retailers will share floorspace with a multitude of brands. For example, a travel agency might also sell sunglasses, swimwear or for those with my genetic code, SPF 30 sunscreen? We are increasingly seeing this on the high street, with partnerships between coffee houses and bookstores, for example, and we should expect more of the same.
There will also be a launch of unconventional, digitally enabled shopping experiences. Imagine being able to purchase products through shop windows and have them delivered to your door. It brings to mind Uniqlo’s experiment with vending machines for people to purchase basics in a fast way. The great thing about this model is its flexibility. Businesses can experiment with different ideas to land the one that works for them.
We are already seeing a move from online to a new space of ‘destination shopping’. Retail is once again growing as a leisure activity and customers still desire that social connection. The Apple store is becoming a place where people come to share time, space, interests. It is no longer just a shop. Shopping centres like Westfield have been instrumental in creating the more engaging destination experience. People travel to these locations for days out, prepared to spend money shopping, eating and entertaining themselves.
They create an environment that merges the online and offline channels through mobile enablement, bringing customers closer to brands that focus on experience and service. Innovation and a mindset that understands the importance of bringing new ideas to life is at the heart of this trend. New ideas (and plenty of them) are great, but they’re only great for your business if you execute on them.
“Retail is once again growing as a leisure activity and customers still desire that social connection.”
The retail landscape is changing and will continue to change. What’s clear is that abandoning your physical estate entirely and bunkering down on your online offering is not the way forward. Rather, the key is to understand which elements of these are important to your customers and why.
Retailers will need to be prepared to bend, turn and in some cases abandon strategies that may have worked in the past. The high street isn’t going anywhere, as long as we can ensure it can be transformed into a place that people want to visit.