Modern Retail are proud to share the ‘Retail Crisis or Retail Evolution’ series, by Naeem Arif, Vice Chair of the Midlands Retail Forum. Naeem shares the ways in which successful high street retailers are adapting to overcome new challenges and thrive, proving the importance of evolution in retail.
In what some are calling ‘The High Street Crisis’; Debenhams have joined Toys ’R’ Us, Maplin, Mothercare, Claire’s, Macy’s, Jaeger and House of Fraser as high-profile names who have struggled to trade in difficult trading conditions.
It is easy to blame ‘online sales’ for this change, but recent numbers report approximately 18-20% of retail is now online and our analysis makes us think this will grow to around 25-30% over the next 18 months. Interestingly, some inner city business districts are bucking the trend and there are lessons to be learned from some communities who have continued to grow despite the High Street Crisis. It is also easy to blame Brexit, but we are seeing an increase in purchase of British Brands in the last 18 months, so the money is being spent elsewhere.
The high street is an important part of the UK economy, but while the last few years have seen a decline for some, it leaves many asking… is it really a retail crisis or have some failed to move with the evolution of the high street?
What Has Changed?
It is easy enough to say that customers’ buying habits and demands have changed. If you walk into your city center or local retail park, you will see people out shopping. The 2018 Boxing Day sales saw huge numbers of customers out and about, but were they all shopping? Many were out for a ‘social experience’.
It is true that the last couple of years have seen some careful spending, in a difficult UK economy under the Brexit cloud. Some big UK employers have cut back on staffing. We have also seen some companies, especially manufacturers shutting operations and/or moving overseas.
The reality is that customers have many choices available to them, both in-store and online. With so many choices, they can decide not only who they want to shop with, but also how they want to shop.
If there is something you can buy online, for the same price and no effort, many question why you would travel to the shop to get it. Online accounts for 18-20% of retail right now, plus services like Just Eat, can bring a whole menu of food to customers’ front door. Time is a big factor here, with many opting to use their time for other things while enjoying the convenience of next day delivery.
The stats are not all doom and gloom though; we have still seen a gradual increase in retail sales over this same period. Our own research shows that people do want to visit the high streets and town centres, but they want more than just the shops… they are looking for the entire experience before deciding where to give their attention, their time and their money.
Why Is This so Important?
Our high streets and town centres are often important for our communities. At a time when we worry about how much time our young people spend online, they are a reason for people to meet, socialise and engage with other people.
If large shops in our town centres are closing down, this does cause concern for some, but is it a problem, or only a lesson to learn?
Town centres are often sources of employment in local communities and they offer casual employment opportunities for young people or parents who want to work as well as managing home life. Depending on which stats you review, there are more than 3 million jobs in the retail sector and the recent spate of high street closures has seen nearly 100,000 jobs lost in the last 12 months alone. This is especially the case in the hospitality sector as café’s and restaurants regularly use casual labour to work different shifts.
As businesses close, the impact is across the entire supply chain, with suppliers losing business as well.
Landlords are also suffering. If their tenants go bankrupt or dissolve under a CVA, not only are they losing forecast revenue, but the value of their property is reducing. This will impact their own businesses in terms of what they can afford in terms of wages and expenses.
So having reviewed the evidence of what is happening, what are the main reasons these big brands are going out of business, and how can other retailers learn and adapt from this?
To read part 2 of the ‘Retail Crisis or Retail Evolution’ series, click here.