Over the last few years UK high-streets have been deeply affected by shifts in consumers’ engagement with physical locations. High streets and brands recognising the importance of physical location in the omni-channel customer journey continue to succeed and prosper. However, there are a large number of retailers, casual dining chains, and other consumer businesses (as well as individual high-streets) that have not evolved at the rate required by the consumer.
The challenge for Landlords: Landlords and place makers must recognise the “carbon copy” retail centre is no longer relevant. Gone are the days of every high-street vying for a piece of the next big brand roll-out; instead, efforts should be aligned to provide the infrastructure and opportunity to build unique places people want to visit. Recognising that the high-street acts as a showroom like any other, the differentiating factors to drive visitors should be unique products, in-person services and experiences that play to the advantages of your place. Having a full-house when it comes to your collection of mass-premium fashion brands is starting to mean less than the former.
Why shutting stores isn’t the solution: This shift in consumer behaviour has left numerous brands with legacy estates falling behind in sales growth versus their more agile counterparts. As ‘through the till’ sales growth fails to match rent hikes by landlords, many retailers have reduced the size of their estate by amputating a tail of underperforming stores. In certain cases, this practice can actually compound the problem. Shutting a store based on its own ‘through the till’ EBITDA measures can fail to account for that store’s impact on brand presence, awareness, and ‘showrooming’ to drive online sales. Brands demonstrate their understanding of this dynamic by continuing to run stores with a negative EBITDA in highly desirable locations (e.g. Oxford Street), with no intention of closing. However, without properly leveraging the store estate to make use of its ability to drive online growth, brands run the risk of leaving opportunity on the table, which pure-play online is more than happy to pick up.
Putting the customer journey at the heart of your store strategy: It’s important to view the opportunity of a portfolio through two lenses; the first being the traditional view on in-store transactions, and the second the online impact of each store. By understanding the relative online potential for each unit (whether existing, new, or recently exited), brands are able to build a model for growth, leveraging their physical estate to drive greater success in the bottom line. Treating online business as entirely separate rather than accounting for it at store level will inevitably miss opportunity and overlook risk factors. The UK’s high-streets are not dead, but there are currently winners and losers. Winners will undoubtedly be the brands and locations repurposed for a new kind of omni-channel customer journey, which values experience and differentiation over uniformity.
Analysts say retail industry faces ‘painful readjustment’ and more store closures likely