The U.K. High Street has always played a vital role as a barometer of the nation’s cultural and economic health. With a record number of national chains going to the wall, high profile closures are changing the look, composition, and even the identity of the high street.
According to the latest figures from the British Retail Consortium, BRC, 11.3 percent of shops in town centres are now empty – an all time high. The rot set in with Woolworths in 2008; since the beginning of 2013, HMV, Blockbusters, camera chain Jessops and the electrical retailer Comet all went into administration.
Frédéric Godart, INSEAD Assistant Professor of Organisational Behaviour, believes that the demise of these chains is partly down to the impact of e-commerce and partly a failure to adapt to a changing economic conditions and tastes. “In many cases big retail chains went under because they were not able to adapt to changing tastes, and that happened before the rise of e-commerce. In general, retail is a very deadly business. Some estimates show that up to 70 percent of all retail start-ups fail within 10 years.”
According to a report just published by PricewaterhouseCoopers, large chains in the U.K. closed 20 shops per day in 2012 – the highest on record. 2013 has seen the downward trend become even worse. Chains reduced their store numbers by 2.7 percent last year, compared with a 0.25 percent decline in 2011 and an increase of 1.2 percent in 2009.
High Street Better Place Without Woolworths
But Richard Perks, retail analyst at Mintel, argues this is not a sign of terminal decline but that the high street is contracting and reinventing itself. “The majority of empty outlets are in tertiary and secondary positions. The High Street has contracted into the primary space: when prime location space becomes available it is let easily. Think back to Woolworths – and the high street is a far better space without Woolworths – those shops have been replaced with retailers doing what Woolworths should have done but doing it far, far better. “ Ironically many of the pound shops who took over Woolworths stores, have a very similar business model to Woolworth’s original one – pile it high and sell it cheap.
Big chains and smaller retailers have been suffering from a toxic combination of weak demand and rising costs. According to the British Retail Consortium the costs of doing business have risen by 21 percent since 2006. With sales values over the same period increasing by only 12 percent.
"These latest administrations are a stark illustration of the pressures retailers are under at a time when we've got relentlessly weak consumer demand coupled with rising costs," says Richard Dodd, the BRC's head of campaigns. “If the government wants to protect the High Street,” he says, “it needs to invest in town centres and address the old issues of parking and access. But, more pressingly, it also has to bring down the costs of doing business.”
Online Threat or Opportunity?
But perhaps the biggest threat (or opportunity) for traditional retailers is ‘e-commerce’ where the volume of online sales has begun to reach critical mass. Last year, shoppers spent 12.8 percent more on the Internet than a year earlier, according to research from Barclaycard, which processes close to half of all U.K. card transactions. Nearly one-fifth of all retail transactions are now made online.
Dan Wagner, CEO and chairman of mPowa and Powa Technologies, responsible for implementing online and mobile retail platforms for high street brands, believes Internet shopping is now more popular in the U.K. than any other country. The recent failures simply omitted to embrace the multichannel world.
“They had only ever dealt with customers in the physical world and failed to interact with the consumer in multiple ways. For example buy online or on your mobile and pick up in store. Or browse in store and we’ll deliver to your home. John Lewis have done that and leveraged their multiple channels and touchpoints with the consumer very well. Apple too have embraced the multichannel approach very successfully with their showcase stores in conjunction with online and mobile channels.”
Forty of the Jessops camera chain stores have now been bought out by telecom entrepreneur, Peter Jones, who is relaunching them as a “click and collect” multichannel model. The stores are being redesigned to create an experience more like the Apple Stores and for the first time prices in store will be the same as online. Jones said at the opening of the first store in London that ‘click and collect’ would be a principal driver of sales in the store’s new incarnation. “I think Amazon will start to lose their market share because they do not have a collect at store. Nobody likes waiting in for a delivery.”
John Lewis’ Multi-Channel Approach
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[This article is republished courtesy of INSEAD Knowledge
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