The high street was facing an uncertain future prior to the pandemic and with many retail firms struggling to survive, Business Leader looks at what the future will hold for the sector?
According to the Centre for Retail Research, almost 180,000 jobs were lost in retail last year due to the pandemic, a 25% increase on the previous year – and they have predicted that more than 200,000 positions are at risk in 2021. However, is there any shred of hope for recovery for the high street?
A CHALLENGING TIME
It is no secret that many retailers are staring over the precipice when they look at what is ahead of them. Despite attempts to try and soften the series of major blows they have faced in recent months, a third lockdown has again increased the frantic desperation to stay in business.
Martin Bysh, Founder at Huboo, comments: “We’ve started the year in lockdown and so high street retailers are facing the same three big challenges they did last year – the inability to open their shops, scared consumers staying away and a growth in understanding about how eCommerce works and the benefits it offers. All of these factors result in far less purchasing on the high street and, at this current moment, there is no definitive end-date to this situation, or any confirmation that it won’t happen again in the future.”
The ever-present uncertainty hanging over the retail industry, and wider UK, has not helped facilitate a possible turnaround – and has even accentuated the challenges the industry was already facing.
David Fox, Co-head of Retail Agency at Colliers International, said: “Simply surviving is the biggest challenge for retailers, as the pandemic has brought into sharp focus the existential factors affecting the sector – over supply of property, high fixed costs (rent/rates/service charge), changes in consumer behaviour, under investment in eCommerce, failure to plan for the changes that were already in transit, and a tendency to operate with a high level of debt.
“The ability to operate in an environment of rolling lockdowns and tiering presents a continued challenge. The real need for retailers is to control costs in the face of all the above challenges with occupiers, landlords and the government working together to reach agreements on rent deferments, business rates and changes in the leasing model with a greater emphasis on turnover rents.”
However, with news of the three vaccines being distributed across the UK, there may be light at the end of the tunnel.
Gordon Fletcher, Director of Business at Salford Business School, said: “The dependence of so much high street retail on casual footfall was revealed during lockdown. But with many of the traditional retailers, their inability to adapt rapidly was the biggest realisation. While small and independent retailers found innovative and creative ways to continue to trade, the bigger retailers did very little. While the independents had to ‘pivot’ to continue to trade with, for example, home deliveries, pop-up shops or even moving into entirely new areas, many of the bigger brands unsuccessfully relied on their bricks and mortar history and a misplaced sense of presumed customer loyalty.
“Therefore, rebuilding consumer confidence in high street retail as an alternative to online – with lockdown and social-distancing the tables have been turned that much. The overall high street also needs to be an attractive offer. As the vaccination programme has impact and people can move about more freely again, the appeal of the high street will be weighed more critically against leisure and entertainment destinations.”
IS A RECOVERY POSSIBLE?
With restrictions hopefully being eased in the months ahead, retailers will need to plan for the return of customers to the high street.
Andrew Martin, global retail design specialist, comments: “The high street will change and of course it will recover. Market towns and village-like areas of London will thrive in the future. Why this will happen is because social interaction and interaction with goods is part of human nature and the high street has been culturally important in the country for this purpose. This will not go away but will have to evolve to provide the services and environments that are now required, enjoyable and life enhancing.”
However, Bysh believes that it will need to evolve to be relevant to the modern consumer. He said: “It will recover to some extent, but it will never be what it was.
“The high street has always depended on a large cohort of consumers shopping in stores; the pandemic has changed this and has resulted in consumers who had never shopped online before doing so and realising the convenience and benefits online brings, so it’s unlikely that all ‘in store’ shoppers will return.
“It’s also more affordable for retailers to transact online, and so when budgets are challenging it makes sense for retailers to focus online more. The savviest retailers with suitable products will treat the high street as a loss leader and use their high street space as a showroom – the Apple model.”
Prior to the outbreak, empty high street units were a hot topic of debate. With high rent costs and retailers collapsing across the country – debates raged on regarding whether rates should be reduced or that they should be turned into much-needed housing. This will impact on the hopeful recovery of both sectors.
Ed Bradley, Founder and Director of Virtualstock, comments: “The high street will never quite be the same again and the government has proposed legislation to allow entire high streets and town centres to be converted into housing. Whilst it will certainly take a different form, it would be wrong to say high streets will disappear altogether. One of the most interesting trends throughout the pandemic has been local high streets in suburban areas enjoying a renaissance as people worked from home, rediscovered their local high streets and wanted to support shops in their neighbourhoods.
“High streets will continue to exist in some form, and, like retailers, they will have to reinvent themselves to remain relevant. Consumers crave convenience and product choice, and high streets will have to give consumers a reason to visit. They will need to attract successful multichannel retailers who use their physical shops to curate an experience and also support their online operations.”
THE ROLE OF AMAZON
Aside from the well-established challenges and the uncertain future the industry was already facing – perhaps the largest obstacle that many retailers of all sizes face, is the relentless and exponentially growing competitor of the world’s largest eCommerce platform, Amazon.
Having already announced that they are now looking at having their own bricks and mortar stores in high streets across the country, and are moving into other sectors (such as groceries and pharmaceuticals) to increase their influence – retailers need to evolve to deal with what Amazon plans on doing in the future.
Fox comments: “It is already known that they are out buying property for various concepts, so in one way they will become more visual. Amazon is in a unique position, where they generate so much cash that the business can innovate. The challenge to the competition is being flexible enough to innovate without the same level of resource, one of the greatest barriers to which will be indebtedness and an expectation to show growth and generate dividends for shareholders.”
Martin believes that the experiential offering that high street stores can provide is the key to successfully co-existing: “Amazon is a big part of most people’s shopping habits. It has the technology and infrastructure that delivers what customers want and are becoming to expect. However, it is not personal or informative, it offers no brand insight and doesn’t offer an enjoyable experience. This is fine if you are buying batteries etc, but for anything more life enhancing or a considered purchase it doesn’t work. I expect we will see Amazon on the high street in some form, also backing up other physical retailers with the use of their technology and infrastructure. I can’t see them going anywhere anytime soon, but like all of the retail industry they will also have to evolve.”
A TECH-FOCUSED FUTURE?
Much like the advancement Amazon has provided as a ‘Big Tech’ firm – almost every industry is in the midst of the ‘Fourth Industrial Revolution’. Therefore, the need for the high street to adapt in order to survive – and potentially thrive – will be driven by implementing the latest innovation.
As a result, technology will sit at the forefront of every customer-facing industry. Therefore, high street retailers will need to utilise the latest tools at their disposal, to work together, provide an experience and reaffirm their position as the centre of communities.
Fletcher comments: “The hybrid role of the high street retailer is one that is appealing. The idea that you visit a high street shop as the showcase which only stocks one item of everything, and you can then customise that item with a salesperson. The highly personalised is then produced on demand and rapidly delivered to your home. This model already exists in new car showrooms, so extending it to other consumer items is a logical progression for the high street. Technologies that help different businesses on a high street work together to make the consumers experience join up will also play a role in the future. Collaboration between businesses will make the high street offering more compelling and more of an experience than a chore.”
Melissa Minkow, Retail Industry Lead at CI&T, concludes: “The future of the high street lies in connected retail approaches, where physical stores complement an online offering, versus the other way around. Now that consumers are more comfortable ordering online and picking up in person, many brick and mortar stores would serve best as micro-fulfilment centres or appointment-only platforms centring the customer service experience.
“This year could also see smaller format, and/or humanless stores on high street as retailers shapeshift to maintain their iconic presence in relevant ways. The high street hasn’t lost its status as a destination, but consumers’ pandemic-induced desires to ‘get in and get out’ quickly will have to be indulged by tech-assisted, convenience-oriented purchase experiences.”