The death of the high street as we know it
The collapse of well-known retail giants and their subsequent purchase by online-only owners leaves behind 15 million sq ft of empty stores and a severe knock-on effect on landlords. British Land has reported that it received only 46% of rents due from retail tenants in the past year, compared with 95% of rents from offices for the same period. But does this shift away from bricks and mortar herald the death of the high street?
Each time restrictions were lifted, shoppers returned in their droves to their favourite retailers and by the time non-essential retail reopened on 12 April 2021, pent-up demand was such that huge queues formed outside Primark, J D Sports and IKEA.
In the midst of what some have called the third retail revolution, Amazon, the ultimate high street disruptor, has opened its first physical store in London. BDB Pitmans client Harrods has been opening stand-alone ‘H Beauty’ destination stores with interactive make-up playtables, skincare stations, plus champagne bars.
Whilst the experience of the last 12 months has ushered in permanent changes for retailers, it has also highlighted some basic human needs that will inform those changes. In this article, we look at what is next for retail and how the most successful retailers are those who have recognised the importance of a customer-centric approach in both the digital and physical worlds.
The explosion in online purchasing has required retailers to innovate incredibly quickly and we have witnessed a decade of change in just 12 months. During the pandemic, those retailers who have been most successful are those who have switched their focus to digital first, bricks and mortar second.
The DIY group Kingfisher (which owns B&Q and Screwfix) has adopted this strategy, encouraging customers to shop online and then collect instore where shops remained open during lockdowns.
Next’s beginnings as a catalogue retailer and its long history of expansion of logistics, customer databases and warehouses has similarly enabled it to weather the storm. Most recently, Next has launched a ‘total platform’ whereby it will host smaller fashion brands on its website, giving them access to its warehouse distribution centres and considerable IT infrastructure so that it can provide a full service for these smaller brands to sell and distribute their products online.
Central to the many lessons learned during the pandemic is the human need for social interaction and some sort of ‘marketplace’ where people can meet. Although it is estimated that there is around 30% too much retail space in the country (and this will inevitably shrink), experience-based shopping within physical stores is likely to boom now that non-essential retail restrictions have been lifted.
During 2020 lockdowns, farm shops and garden centres were a huge hit with their combined offerings of food and flowers plus crèches, cafes and gift shops, providing an ‘outing’ for all the family. The high street can learn from this and it’s likely that the most successful sites will be those where there is a mix of leisure, bars and stores to attract customers.
Shops within shops is not a new thing – think of Argos outlets within Homebase and Timpsons in Tesco. With increasingly green shoppers also considering the effects of car pollution on the environment, the ability to purchase from a number of retailers within one store is likely to be popular. One of John Lewis’s strategies is to increase the number of its outlets within Waitrose stores, whilst the Kingfisher Group is partnering with Asda in placing B&Q outlets in the latter’s supermarkets. Next has entered into an agreement with Amazon to allow customers to pick up parcels from its stores, driving footfall and incremental spend to its own products. Retailers recognise that, if they attract a customer to one brand, they may buy from others located within the same space, not to mention the cost savings for tenants taking only a small area within a store.
Combining digital and physical retail spaces
The key to future success for retailers will be the ability to adapt to the changes brought about by the pandemic’s effect on customer behaviour. The customer can now choose from a wide variety of ways to shop – online, in-store, click and collect, kerbside pick-up – and this means that the successful retailer will need to offer all of these options in order to survive. Physical stores will need to be utilised not only as sales points, but also as distribution and returns centres. Next has continued to thrive as a high street retailer because it has managed to integrate its online and offline proposition in this way, using stores to drive click and collect, including one-hour in-store pickup, and process ecommerce returns.
The customer is always right
This age-old service-industry adage has taken on a new meaning with the increase in awareness of customer habits and behaviour gathered through tech platforms and loyalty schemes. A good example is the sportswear retailer Nike which has long-standing connections with its loyal customer base, principally through an app which offered such things as running guidance. The data gathered through this app enabled Nike to react quickly to its customers’ changing habits so that when many took up yoga during successive lockdowns, sportswear production could be changed accordingly. When Nike opened a flagship ‘interactive’ store in Paris last year, they also demonstrated the bricks and mortar side of the customer-focused future. Shops are likely to become showrooms for both their products and customer interaction, with sales assistants acting more as stylists and brand ambassadors in future.
It is generally agreed that many of the retail habits developed during the pandemic are here to stay; consumers are unlikely to forego the convenience of the online shopping skills they have acquired and retailers must embrace e-commerce to stay afloat. But the demand for the first-hand experience of in-store shopping is equally clear.
Imagination will be needed to reinvigorate retail spaces and formats which are now surplus to requirements – local authorities’ plans to re-purpose some of their shopping centre investments into housing, community hubs and green spaces are well underway and have been facilitated by the partial relaxation of planning laws. The remaining physical retail space will no doubt attract customers back to the high street, but their expectations will be for a customerservice based experience. In this third retail revolution, the customer is very much in charge and it will be for the retailer to adapt and provide a new form of marketplace, both on and offline.