If the headlines were to be believed you’d think the high-street was in terminal decline and everybody was withdrawing at the speed of knots. Store closures across the board and brands shrinking to survive, it’s armageddon on the high-street, they scream!
The retail market has always seen brands or chains crash and burn over the years. It’s part of the retail renewal cycle and allows others to appear and grow.
Left - River Island's new expanded store at Milton Keynes' Centre:MK
"As consumers, we are becoming more and more demanding, each new level of service experienced serves to simply raise the bar even higher. In the UK in February 2018 online accounted for 17.2% of total sales (source ONS). Whilst this is still increasing (15.6% in February 2017) it is still a relatively small proportion of total sales meaning that over 80% is from the high-street. So, it is clear that the high-street is far from dead but it is evolving at a rapid rate - Darwinism on the high-street if you like, where the process of evolution naturally culls the weak whilst the strong prosper and survive,” says Andrew Busby, Founder & CEO Retail Reflections.
Continuing to grow, online retail sales leapt to 18.8% last month - April 2018 - and it won’t be long before it hits 20% and maybe even 30%. For the offline retail optimist, though, it means 80% is left for the taking offline in physical stores.
But, while the focus has been on chains closing stores - M&S announced 100 stores closing by 2022 - there are a few strong and growing brands stealthily tightening their hold and grip on the high-street. The focus is on bigger and better stores in premium locations: less stores but better.
As brands vacate premium sites other brands can cherry-pick and expand into the gaps, but only in the top tier of shopping centres and cities.
For example, both Zara and River Island are carrying out major expansions of their stores at Intu Lakeside. River Island will be doubling the size of its store to 21,000 sq ft while Zara will treble its store size to 35,000 sq ft making the stores among the largest in the retailers’ portfolios. They are the latest retailers to invest in flagship stores at Intu Lakeside since H&M doubled the size of its store to 36,000 sq ft and Next opened an expanded 70,000 sq ft store in Spring 2017.
When Banana Republic vacated Westfield White City, Zara took the opportunity to create the biggest branch in the UK. River Island recently doubled the size of its store in Centre:MK in Milton Keynes. The retailer doubled its existing unit to 20,000 sq ft to accommodate the brand’s full range of womenswear, menswear and children’s fashion ranges.
Nick Tahir, River Island, Head of Menswear Buying says, “We have over 280 stores in the UK. In an increasingly competitive high street, it is important to keep River Island stores looking fresh, relevant and exciting. With 30 years heritage, naturally some stores will require a makeover and in some towns/cities and that has been a key focus for us, we have also been increasing our square footage, to accommodate the needs of our customer and our growing divisions (for example we launched RI Kids and RI Mini only a couple of years back and the demand is consistently growing).”
“Although retailers are seeing an impact on bricks and mortar due to mobile and online, retail is still the biggest mix of sales for us. With our heritage, stores will always play an important role. They are the heartbeat of the River Island. The challenge for us and our peers in the industry, is to keep our customers coming back again and again. We do this by enhancing their shopping experience – whether that’s through pop-ups and exclusive events, or through offering something that our customers can’t find with some of our competitors; take Style Studio for example, our complimentary Personal Shopping service. It is vital for us to keep revamping and improving our store aesthetic to draw footfall, creating theatre through VM and windows and of course constantly refreshing our product offering to stay relevant and exciting.” says Tahir.
As stores grow larger at key shopping hot spots, retailers can give fewer locations more attention and fine tune, update and invest in those locations. But, what this will also mean is many towns will lose their well known names and become secondary as the money is sucked into fewer, bigger places.
“Most retailers with a large store estate have too much space so what we're also seeing (landlord rent restrictions aside) is an expected re-sizing and in some cases re-purposing of space eg. Debenhams considering renting out space to WeWork.” says Busby.
“All this means that the stores which survive will need to be far better than those we currently experience. For example, the poor quality of the Toys R Us stores was a major factor in it collapsing into administration.” he says.
“But the fascinating dynamic is that quality and customer experience in store is largely dependent upon the particular shopping journey ie. if it's a distressed purchase then the customer just wants to get in, find what they need, pay and leave - as seamlessly as possible. However, if it's for say a luxury item they may well welcome, indeed, seek out engagement and advice; being quite happy to spend far longer. Both journeys will be judged by different criteria. The trick for retailers is to recognise what journey we're on and act accordingly. Facial recognition and AI is going a long way to be able to tell what mood we are in when we enter the store.” says Busby.
Right - Zara's new store at Westfield Stratford
The shopping centre companies know this too. The recently abandoned £3.4bn tie-up between Hammerson and Intu failed, I think, because Hammerson were probably only interested in a handful of their top sites like Manchester’s Trafford Centre. Trying to offload or revive the others would be costly and a distraction and knowing where the market is heading, it knows it’ll probably be able to bid on what it wants individually if Intu starts to wobble in the foreseeable future.
In order to survive it’s going to be about fewer players with less but stronger sites. As more close, it strengthens those which are left. If you believed the newspapers you’d think that every retailer had given up on physical stores, but the clever ones are only getting started. When the growth in online slows or plateaus, these proactive retailers will be positioned to take full advantage of the eventual return to the high-street.
Read more expert ChicGeek Comments - here
News on the grapevine New Look is close to going under. I don’t think this will mean that New Look will disappear, it’ll probably be pre-packed into a slimmer and more nimble retailer while shaking off its debt. It has 600 stores, which seems rather top heavy in this current retail environment.
Ironically, when it’s not cold enough many retailers blame the weather for not shifting clothes, and this week, the whole week, or even two, will be a write off, for the majority of retailers, particularly fashion, because people aren’t leaving the house or simply can’t get to the shops due to the snow and many items there won’t be suitable anyway. Two disruptive weeks could push a few more retailers over that administration edge.
Left - Expect to see more of these and for longer
I think we’re at a tipping point for physical retail, particularly larger shops with big overheads. These gaps are big and aren’t being filled. 102 of the 164 BHS stores that went out of business are still un-let nearly 2 years after its closure. Add in Toy R Us and the announced store closures from many retailers such as Marks & Spencer and Debenhams and you have a very gappy and unattractive grimace to the majority of shopping areas or high-streets.
This downward spiral simply speeds up the death of these areas: fewer shops, means fewer visitors and therefore fewer shops.
Any retailers who sell the same items as Amazon seem to be in trouble and fashion has to acknowledge that the ASOSs and Boohoos of this world have taken a massive chunk of spend and continue to do so.
Fashion retailers are damned if they do and damned if they don’t when it comes to the internet. Even the best website in the world will still eat into physical stores. The bigger and better you make your online offering will only encourage people not to visit your stores. It’s a feeling of struggling to stand still, and, with many cases, going backwards.
I live in Croydon and there’s been talk of a big, new Westfield for a long time. The town centre is very dated and run down and needs the investment and also the ‘Westfield’ name to put it back on the map. But, Westfield has gone very quiet. They’ve kicked the development back to start in 2019, not really sure why, and having just been taken over by a French company it wouldn’t surprise me if they wanted to relook at any new developments.
Croydon is a risk. It isn’t White City. While it has good transport links, it also has many shopping centres close by. I’ve said to people buying into ‘up and coming’ Croydon, not to buy thinking a Westfield is definitely coming. John Lewis was always muted as an anchor tenant and they’ve said they don’t want to open anymore stores ATM. If it does happen, it will affect the Bromley, Kingston, Bluewater and even Brighton shopping centres. The pain will be felt somewhere.
So, what to do? These units are too big. Shops and shopping centres will have to contract. These spaces need redesigning and dividing. What we need is housing and leisure facilities. The future of physical retail will be ‘want’ and not ‘need’. It’ll will be about service and human interaction - Read TheChicGeek's Human Cookies. Online is unbeatable with need, and its dominance will speed up even more with automation and driverless delivery. But, we’ll still want to get out of the house, see what’s new, try and touch things. It’s just unfortunate that some of these larger retailers and their footprints are unsustainable.