With the increasing appeal of online shopping, which allows consumers to benefit from an abundance of stores at the click of a button, as well as next day delivery, it’s no surprise that there is continuing debate and uncertainty about the future of the high street. But is it all as bad as it seems and is it simply a question of bricks versus baskets?
The Insolvency Service’s statistics for 2017 show that the retail sector had the third highest number of new insolvencies and just yesterday, it was announced that Toys R Us and Maplin had both entered administration. This, combined with the disappointing results posted by some retailers, such as Next, for the Christmas period and high-profile insolvency procedures for retailers such as MultiYork towards the end of 2017, suggest that the news for the retail sector seems to be all doom and gloom. However, research carried out by Gordon Brothers and discussed at a Turnaround Management Association (TMA UK) event in early February, suggests that there is not quite the retail apocalypse heading this way as the headlines might have you believe.
As might be expected, the discussion surrounding retail is often on the changes that technology has made to the sector. The positives being that when embraced, technology can drive sales and efficiencies, ultimately giving a retailer access to a global marketplace. Although this provides immense opportunity, as more people turn to online shopping, it has an adverse impact on the high street, leaving shops with a reduced footfall and in some instances forcing them to close altogether.
However, the research carried out by Gordon Brothers demonstrated that if retailers, whether online or on the high street, focus on seven key trends, then the retail apocalypse will not be quite so imminent as first believed. These key trends are: a personalised consumer experience; using big data and technology effectively; paying attention to changing consumer demographics and ways of shopping; being omni-channel retailers or at least embracing e-commerce; the polarisation of the discount and premium ends of the spectrum; paying attention to how different sectors are changing and evolving; and using retail space differently, especially to solve over-spacing. On the face of it, one of the main issues for Toys R Us and Maplin is the competition presented by online retailers. However, there were clearly other issues at play here, especially for Toys R Us. This was also one of the points highlighted by Gordon Brothers who showed that the distinction between successful retailers and those that fail is less about physical shops versus online offerings but rather, it is more about the service provided to the customers and the retailer’s ability to evolve.
Retailers feel that the future of the industry relies on them being progressive and using the technologies that are available to them to appeal to a much wider audience than would ever be possible when you rely on a shop front.
It is certainly the case that online stores often have cheaper overall costs, as they are not obliged to pay high rents for premium positioned properties, so they are able to pass on savings to the customer. Undercutting on price and having access to a wider portfolio of products from suppliers that can be based across the world makes them a powerful force for more traditional retailers.
In contrast, however, high street retailers see the advantages that come from a shopper experience, something that is more personal and that could subsequently build greater brand loyalty, which in turn is more likely to lead to future sales and advocacy.
With increasing pressure on the retail sector, as online shopping also drives further competition, it is clear that there needs to be a balance and that both bricks and mortar and baskets could, in fact, become ‘better’ bedfellows. It’s not difficult to see both points of view, but perhaps the question isn’t which option will dictate the future of the retail sector, but how can they better work together to the benefit of the customer.
With many experts agreeing that the retail market will continue to change, the debate doesn’t look like it will find a resolution any time soon, but in both instances, shoppers still expect service. For the most part we discuss retail as if every shop or online store is selling the same product, whereas we all know that this isn’t the case. What differentiates a brand is personality and that is best communicated through experience.
This can be harder for online retailers to replicate. People like people. In order to build brand loyalty, a consumer is going to expect more than a picture, a basket and a checkout function. However, this is where the use of social media can be a useful tool, especially among the younger demographic.
Whether you agree or otherwise, there is some confidence in the argument that until online and high street start to work more closely together, putting the consumer and their experience first, neither will reign supreme.