Published Thursday 21st February 2019
The poor performance of the UK physical retail sector has been well documented over the last twelve months. A poor 2018 Christmas period signalled the end to a calendar year that had seen many major companies face administration or severe contractions.
A committee of British MPs has recently warned that city centres could become ‘ghost towns’ if the current trend is allowed to continue. The Government has pledged to support bricks and mortar retail through measures outlined in the Chancellor’s Autumn Budget, but many warn it is not enough. However, some businesses are bucking the disappointing retail trend and modernising the high-street.
The Digital Takeover
The recent comments by a committee of MPs suggested some ways the Government could tackle the retail downturn. One of the key ways they feel traditional shops can be supported is to “level the playing field” between them and online giants, such as Amazon. E-retail is something that many agree is a key reason for the recent high-street downturn.
Figures from the Office of National Statistics show that online shopping has exploded in popularity over the last ten years. In 2008, online retail accounted for 4.9% of all retail sales in the UK. By 2018, that figure had risen to over 16%. These figures may not sound like much, but it’s the speed of this growth – compared to the minimal increase in traditional retail – that has people concerned. In 2017, for example, store sales saw growth of around 2.3% over the previous year, whilst online retail grew by 15.9% in the same period.
There are many reasons why these changes have occurred. One of the main explanations is the expansion of technology. Since 2008, the ease with which people can get online, both to buy and to sell, has grown exponentially. This has also led to an increase in consumer technology confidence, where individuals feel comfortable making purchases from their mobile or computer. According to Statista, only 53% of British individuals made a purchase online during 2008. In 2018, that figure was at 78%.
The recent rise of online shopping and subsequent fall of bricks and mortar retailers has also been impacted by the wider economy. Recent economic struggles which have seen UK GDP fall to its lowest since 2012 have had an impact on consumer spending. Coupled with economic uncertainty surrounding Brexit, the modern consumer is much more interested in price, something which bricks and mortar retailers often struggle to compete in. This recent ‘perfect storm’ has seen many established high-street names fall into administration over the last twelve months, including HMV, Evans Cycles, House of Fraser and Toys ‘R’ Us.
An Evolving Consumer Experience
However, the recent struggles of traditional retail cannot be put purely down to costs. The fall of companies such as Poundworld and Bargain Booze owner Conviviality, who both went into administration early last year, is evidence of this. What is clear from recent high-street failures is that the traditional retail experience is becoming outdated, and businesses are tasked with finding new ways to appeal to consumers. Companies have to offer something different, more personal and engaging, to compete with the convenience and price of online retail.
For retailers to compete, they should look at the success stories that have come from bricks and mortar trading over the last year. During the first half of 2018, there was a net decline of around 100 fashion stores from UK high streets. However, there was a net increase for supermarkets, bookstores, stationers, coffee shops and ice cream parlours. These are sectors that are creating growth during a time when many are struggling to stay afloat.
Supermarkets, in particular, are the clearest example of the ‘combined experience’ that many analysts believe represents to future of retail. Many major supermarkets now offer a range of additional services in-store, such as cafés, pharmacies and opticians, or novelty features such as designing your pizza. It is believed that any shops that hope to succeed on the future high street will need to adopt a similar ethos.
Examples frequently mentioned are high-street fashion outlets with hairdressing salons inside or stationery shops with rentable office spaces for freelance workers. By adapting their offering into a more engaging experience with added value, retailers can ensure they are appealing to modern consumers with something that cannot be replicated by online competitors.
Time for Retailers to Adapt
It is crucial, therefore, that retailers begin evaluating and reshaping their business to fit with the modern landscape. Here at ERA, we have an expert team that can help you reduce retail operating costs through effective procurement strategies. Our specialists will work with your business, helping to streamline your supply chains in areas such as packaging, distribution and utilities. Making these changes now will help you be prepared for the future of retail, so why not speak to our team and see how we can help your business today?