3: Future Retail
Retail is evolving fast! What will it take to be part of the future retail marketplace? Where are you investing?
The global COVID-19 pandemic hit retail HARD in 2020. A truly unexpected world event that had a devastating impact on retail, forcing change in the industry and most tellingly, a huge change in consumer shopping habits.
To understand how retail has changed in the last 18 months we need to look at some key facts.
In November 2020 footfall was down by 55% versus the same period in 2019. Before this footfall had dropped by 10% over a 7-year period. In that time online sales had increased to 21% of all retail sales by the end of 2019. During the national lockdowns the online share of total retail sales had significantly increased to 33%.
With a significant decrease in footfall comes a more physical concern – store closures. Retail closures have been a concerning statistic in recent years, however the acceleration during the pandemic has been alarming. In 2020 there were over 11,000 closures and approximately 5000 openings (total retail). By June 2021 this figure had reduced to 8739 closures and 3488 openings.
Should it be a surprise that Fashion retailers make up 1,063 of the store closures? This was one sector struggling with declining footfall and the challenge of online sales share BEFORE the pandemic. Typically textile, clothing and footwear retailers achieve a high % of online sales of around 29%. The core fashion consumer has always been an early adopter of online shopping. Where the consumer is easily influenced by well… ‘influencers’ and online shopping goes beyond a website and into the social commerce realm – it’s not a surprise to see fashion retail struggle in the ‘physical world’
Have you noticed the number of empty units on the high street? 10 years ago, there were empty stores – this is not a new phenomenon. Then the issue was largely limited to ‘smaller’ market towns, challenged by out-of-town retail parks, where consumers were selecting ease of shop over retail assortment.
Now we see the problem in all major UK high streets and regional mega malls.
Even the prestigious Oxford Street and Regent Street shopping streets in London are blighted with HUGE empty stores, ex-department or flagship worthy stores. The next time you visit Westfield White City, take a look at the amount of empty units, some of which have never been occupied. Who will fill these units in coming months and years?
The role in which a physical retail store plays as part of the overall shopper journey has changed. Retail stores have always delivered ‘theatre’ as a key component in capturing consumers attention. Over a 100 years ago, the butcher, baker or candlestick maker would display their wares using visually appealing displays or use sensory experience to make the shopper pay attention and make a purchase – freshly baked bread had the same effect then as it does now…
A big element of shopping is influenced by an instinctive human need to be a ‘hunter-gatherer’. In the modern world we may utilise fewer primitive tools to help our quest, such as our smart phone or a google search.
We will still instinctively choose products, whether they be for consumption or adornment, based on how they make us feel.
The modern retail experience must allow consumers to discover and interact with products. Helping a consumer create a strong emotional connection with your brand is vitally important. Psychologically, retailers have an advantage in their physical stores, humans thrive for human-to-human contact and the aforementioned ‘hunter-gatherer’ instinct, means the desire to find and obtain an item they ‘need’ provides reward.
That feel good factor you have when you’ve found ‘the perfect dress’ or completed a big weekly shop… That’s serotonin, the feel-good chemical your brain releases, a mental pat on the back if you will.
WHAT IT TAKES…
The biggest challenge that physical retail stores face is to stay relevant to the consumer and their evolving needs. Some brands are leading the race and adapting their physical retail proposition.
John Lewis have always been an expert in consumer engagement and creating opportunity to test and experience products in their store. Consumers ‘showrooming’ products in stores and buying online has been an important part of their wider consumer purchase journey for a while. Lush – arguably have the most interactive and engaging stores on the high street, no surprise due to their products (the smell!) and the quality of service.
Engagement wins. Physical retail stores will continue to offer enhanced techniques when engaging the consumer. Elements that are limited at the moment will become commonplace – such as digital screens and directional audio to deliver impactful messaging. You’ll see a greater level
of interactivity, both to create theatre and to aide product selection. Gamification in store or via a mobile device will give the consumer a chance to win free gifts or promotional discounts to spend in store. Sensory experiences that engage taste and sense of smell will be commonplace. The most important element of consumer engagement will continue to be face-to-face customer service, you can’t replace human contact with an AI Chatbot.
Technology will continue to play a big part in future retail. Shopping online or via a mobile device allows the consumer to receive tailored notifications and offers – informing them of new product launches or special editions of an item ‘They Must Have’.
What does this mean? Simple answer, the consumer instantly decides to either ignore or explore, following their interest through to a purchase.
INVEST, EVOLVE AND PROSPER
The physical retail marketplace is constantly changing, none more so than in the last 18 months. Consumers have a number of ways to engage with a brand or retailer and make a purchase, online or offline. Do consumers prefer to shop online over an in-store experience?
What measures should a retailer put in place to make their store more appealing and experiential, drive footfall and maximise conversion?
Data below taken from a recent survey by Retail Gazette.
TOPSHOP – THE BRAND WHO FELL TO EARTH
It’s been nearly a year since TOPSHOP went into administration and sadly closed their stores, leaving a huge gap in the heart of UK retail. How could a retail brand that prided itself on being a trend-setter, fail to keep up with the times?
The short answer is, lack of investment, at the right time in the right areas. A golden rule of retail is, regardless of whether you’re a market leading brand or a challenger brand, is to compete with you competitors. TOPSHOP had weathered challenging storms in the past, in particular the challenge of fast fashion retailers such as: New Look; Matalan and Primark, who were all able to beat them on price and match them in style. To keep up, TOPSHOP lowered price points and product volume increased, putting massive strain on turnover and profitability.
The biggest challenge was dictated by the consumer, namely their desire to be inspired and shop through their smart phone or computer, with the likes of ASOS and BooHoo delivering a market leading, fast fashion e-commerce shopping experience, and (importantly) linked to a credible social media presence. TOPSHOP failed to invest at the right time, and reached a point where they couldn’t invest, as their market share continued to dwindle. When TOPSHOP went into administration they had 300 stores in the UK, far too many. They should have started a store reduction strategy 10 years ago (at least) whilst investing in a sound e-commerce platform and connected social media strategy.
The retailers that evolved or grew their business in line with technical advancements, in the industry and consumer shopping habits, each now have a sustainable business model, which in the first few months of 2021 would have benefited from TOPSHOP’s demise.
THE HIGH STREET FIGHT BACK
There will be a time when the online sales share will plateau, with physical retail maintaining a healthy share of sales as part of a complete consumer journey – by then the purpose of a physical store will also evolve.
Rather than just a retail space, they will also need to become fulfilment centres – think of them as high street warehouses, full and primed to provide same day deliveries to the consumer.
Why have 1 or 2 distribution centres when you can have 20 across the UK? Locations chosen based on population level and consumer demand. Ease of shop and speed of shop will never go away, now that they have been normalised, retailers will just make them easier to maintain.
Ignoring the fact that high streets are fast becoming unattractive places to visit due to the high numbers of closures and vacant stores, what must retailers do to attract the consumer back into their stores and where do they invest?