Yes, another big UK retailer, Republic, bit the dust today. It’s been an incredibly tough few years for the High Street, with retailers having to negotiate through the challenges of out-of-town retail parks, online competition and the deepest recession in our lifetimes. And it’s unlikely to end any time soon as consumer spending bumps along the bottom for a while to come.
Yet despite all appearances, we don’t expect the High Street to suffer a lingering death. In fact, we expect to see something of a renaissance, although it may take some time as the recession plays itself out and the industry adjusts to the new reality of retailing (read about it in our “Tomorrow’s Retail” report).
In essence, for customers, the business of shopping won’t change. A combination of price, convenience, urgency and emotion will determine where a shopper chooses to spend on any given occasion. What will change is the level of information available to the consumer to make these choices. We’ve moved from ‘traditional’ to ‘multi-channel’ to, now, ‘hyper-channel’ – with customers using an almost endless permutation of routes to discover, research, buy and report on their purchases.
Just how fast the retail landscape is changing is illustrated in this great interview with eBay CEO John Donahoe, who felt it necessary to shock staff by telling them the business was “on a turnaround” and making radical changes to the business model of a so recently innovative company.
The distinction between offline and online sales is already blurring, and will become even more intertwined as the customer uses the physical shop as a ‘showcase’ and can choose whether to make the purchase there and then or later, online or off, to take home then or be delivered later. Price visibility will become critical as it becomes easier for customers to compare prices and more of them have the technology to do so. Mobile payment will explode, making cash and cards virtually redundant within only a few years.
The expected impact upon the High Street will be that large retailers reduce the number and size of stores as both coverage and in-store stock become less important.
The less expected outcome, as pointed out by Richard Cuthbertson of the Oxford Institute of Retail Management at Saïd Business School, is that “…price transparency could encourage people back to the High Street because they know they don’t have to be sat in front of their laptop to get the best price”. Customers will have a new confidence to make informed choices that aren’t always price driven, or will just stop making the assumption that prices are always cheaper online. Online shopping is convenient, yes, but there’s nothing like coming home with an armful of bags and boxes if you know you aren’t paying over the odds for the thrill. And we know price isn’t everything – businesses such as John Lewis and Amazon aren’t the cheapest 100% of the time, but customers return because these retailers have built a relationship with their customers where the convenience and service outweigh any minor price differential.
So, we will see a new mix in the High Street. Yes, the next few years will see the large retailers reduce, withdraw or just stop trading. But Manufacturers will increase their bricks-and-mortar presence as ‘direct touch’ becomes obligatory. Apple is manufacturer, retailer and service provider to its customers, who don’t distinguish or care which bit they’re dealing with.
Rents will fall, which will encourage the remaining big players to return, albeit to smaller premises. And the new High Street will even offer an opportunity for smaller and local businesses to move back in and reach their niche markets more sustainably. The consumer once again gets a varied, active and busy High Street.
Now, doesn’t that sound great?