Doug Tweedie, Head of Midlands Retail at Cushman & Wakefield discusses the future of UK Retail and he changes we are likely to see online and on the high street.
The last two weeks have been reminiscent of the dark days of 2008. Announcements from Toys R Us, Maplin, Prezzo, Chimichanga, New Look following the likes of Byron and East don’t make for good headlines if you have any connection with retail.
In the last 10 years consumer habits, how we spend our time, what we want from a shopping trip and technology have changed dramatically.
So what can we deduce from recent events? Rent and rates are too high? In many areas they are so that’s a valid point, but limited to those on old leases, as rents in most locations have been rebased. Intense competition has also led to a squeeze on prices, and whilst this has been better for consumers, some retailers have been pushed to breaking point. The continued rise in the cost of materials, goods, staff, together with economic uncertainty, has presented a huge challenge, particularly those carrying large debts.
Changes to the internet
Looking beyond the headlines, consumers have more options when it comes to buying goods, but we’re not seeing the seismic shift towards online and mobile only retail. Estimates once said that by now 60% of retail spend would be online, in reality it currently stands at around 18%. Last year omni-channel overtook pureplay in terms of sales growth, with 7.5% vs 1.9%. The argument for a strong platform of physical stores/website/mobile app is becoming far stronger.
The internet has of course brought increased competition but what are the positives of this increased competition? Shops have never looked so good. Shopping Centres have never offered so many different facilities, they are now genuinely a place to spend the entire day with family or friends, and increased competition has made both retailers and landlords step up to the mark. Those that haven’t yet, or won’t, will struggle.
With overall spending rising, how do retailers maintain their edge over the competition? Continuing price wars will surely to do more harm than good. Research is telling us that customers want a better experience, and that’s far more than just price driven, it’s the entire package.
Instead we’re seeing a new breed of retailers emerging, the independents, the ones with ideas, a cutting edge brand and quality staff delivering an experience that resonates with the consumer. A great example is Nottingham’s Ugly Bread Bakery, mixing a quality food offer, workshops, yoga classes and meeting space, making the most of every square inch of occupied space, and engaging with the customer. Take Boxpark and The Big Box Company for example, promoting flexible occupation for non-corporates in an interchangeable and shared retail and leisure environment, creating that Instagram worthy experience.
Shops became boring, stale environments and recent failures suggest rapid growth has led to operational mistakes, and questions over whether the VC model really works. So, how’s it going to change?
What are the biggest changes coming in retail?
This will have a big impact, but given the cost involved, this will involve greater use of retailer apps, tools to research products, check stock levels and offers. Faster payment e.g. Amazon Go, will be next. Then will come the introduction of visual search, facial recognition, AI, 3D mirrors and direct marketing particularly in fashion stores.
Brands taking every stage of the process in-house. Controlling branding, staff acting as brand ambassadors, member floors, exclusive offers, events, supply chain, complete transparency – the consumer is more informed than ever before, rising to this challenge will ultimately help brands win back loyalty amongst a consumer base seen as purely deal driven.
Retailers will collaborate with other like-minded, complementary retailers, whether it be fashion and homeware or food and fitness.
On the big stage, in the super prime High Streets and Shopping Centres there will be more of the same, better quality shop fits, and knowledgeable, motivated staff. Combine this with a quality breed of new, independent brands and despite the headlines, the future of retail is a very bright one.
We recently provided an update of the retail market to our office, and provided a long list of occupiers currently seeking representation in Birmingham, 95% of which no-one had heard of. This is a great sign, an indication that retailing going forward will be different, experience based and interesting, something which people can’t find online.”
Going forward there will be failures, and many will fail for the same reasons, but there is a huge amount of positivity, we just need to look beyond the headlines.