Retail and eCommerce landscape is swifting
Retail and eCommerce are constantly evolving and in the press this year you can read stories of the doom and gloom in retail. The UK retail trends are always a few years behind the US whilst the trends in continental Europe are three to four years behind the UK. Because of this, the UK is following the US trend where traditional mid-market retailers are struggling. You will see in the UK high street, that 1 in 10 shops are empty, a trend that has continued since 2015.
In the UK, if you take a walk through any high street in the country, you will realise that shops are empty. As you will have seen in the press many household names in retailing have gone into administration, such as Maplins, an electronics retailer. Another example worth noting is that of House of Fraser which was on the verge of closing recently. Other retailers are closing stores to protect their businesses such as M&S, Debenhams and Mothercare.
What we are seeing in the high street is not only occurring in the Retail sector, but banking, travel and the restaurant business are also facing the same issues; Natwest and Lloyds banks have had to close many branches. Because of these many stores, no matter the sector, are either empty or closing. So, the question that arises is: what are the reasons behind this crisis and why are well-established brands struggling? It not as if there are less customers as our population is increasing year on year. Many will blame Brexit and whilst this has had some sort of impact; most of our goods come from China, so in theory this should not have a great impact on our high street.
Speaking with retailers there seems to be a common theme:
- Rents: Landlords are increasing prices due to the high demand for housing for the growing population.
- Rates: This “tax” is out of date and is far too high for most retailers.
- Wages: The minimum wage salary keeps on increasing.
- Customers: Footfall has dropped as UK customers have now trained to be lazy, as it is far easier to order from Amazon and get a product delivered Same Day or Next day than to go to the high street. This choice seems to have been picked up by the Millennials and Gen Z who prefer not to visit shops, as they can shop through smartphones and the products, will be delivered to their homes.
Because of this, it is becoming too expensive for retailers to have shops.
However, there are exceptions to this and London is one of them. One of the reasons is the low value of the pound, so there are many tourists in London that like to shop. Another reason is that areas such as Bond Street and Regent Street, have high-end brands taking retail space. This is a loss for the brands, but it means these brands can attract a new generation of the shopper to their products.
Meanwhile, discount shopping areas, like Bicester Village and Gunwalf are attracting a customer that wants high-end brand products but at a discounted price.Chinese tourists will fly over 5000 miles to visit these shops just to get brands and famous designers products at a discounted price.
Thankfully due to eCommerce it is not all doom and gloom, the retailers that have focused all their efforts on eCommerce are the current success story of retail. These retailers have removed the need for physical retail stores whilst offering the same or even better services with their online offering. Companies like Missguided, Boohoo and Lovehoney are all great examples of retailers who have an online business that is outperforming the traditional mid-market retailers that have a physical presence.
But you might ask where does this leave our high street? While landlords keep high rents and councils keep high rates, it will mean that we will still see shops being empty. However, when the rents and rates are reduced we will start to see more independents returning to our high street. If the retailer that returns to the high street is clever, they will focus on online eCommerce sales with the physical store being a mini-warehouse to store and ship products to their customers and having an Argos style shop front where customers can order products.
While the high street is not dead yet, in the next year we will see more traditional mid-market retailers going into administration or closing stores under CVA agreements. eCommerce will continue to grow and will be the dominant force within retail.
Jason Bramsden, COO & CTO at SQLI UK