Choppy Waters on the High Street

Hearing that these are tough times for the High Street is not new, but it’s no less shocking hearing news of bankruptcy, receivership and profit warnings from some of the biggest names in retail.

October’s big news sees arguably America’s most iconic retailer filing for bankruptcy, but Sears’ demise is no outlier,  While the US economy grew a healthy 2.3 per cent in 2017, the year ended with a record number of store closings, nearly 9,000 while 50 major chains filed for bankruptcy.    In the UK, August saw House of Fraser going into administration and the first half of 2018 saw no less than 3 profit warnings from Debenhams.

It would be easy to see this as just the inevitable outcome of the rise of eCommerce, but a closer look reveals that there’s much, much more going on than just a shift to online shopping.

There’s no doubt that eCommerce has had a major impact.   Traditionally, consumers were attracted to department stores because they stocked a large range of products in one place, carefully curated to appeal to their budget and lifestyle.  The large size and buying power kept the prices down. However, online shopping can immediately offer a far more extensive choice than any physical retailer ever could.

But there’s still the demand for an experience, and delivery is fundamental.  One of the apparent winners in the epic battle for High Street survival is Sports Direct – significant shareholder in Debenhams and buyer of House of Fraser out of administration.  Their investment in the distribution and logistics side of the business has long been touted as key to their success – with stock where they need it, when they need it.  Or, more importantly given our demand for speed and convenience, delivered to the customer where and when they want it.

Convenience is just one element of the experience though.   We still want to go out, socialise, exchange ideas and touch objects – and that is unlikely to change in the foreseeable future.   A number of analysts have cited Sears’ under-investment in stores as a big factor in their demise “Some stores have shown signs of decay, such as crumbling walls, cracked floors, and collapsing ceilings. Sears employees have hung bed sheets and shower curtains to hide empty store space.”

Apple were early pioneers in creating retail spaces that allowed customers to ‘experience’ the product and the brand.  More and more stores are now recognising the need to have the same convenience and range as customers expect with online, but with a level of experience that can’t be beaten by websites and apps.

The role of ‘anchor’ stores to attract footfall to city centre high streets and out of town malls has long been understood.  Increasingly these ‘anchors’ are geared toward experience – and brands who once depended on the big department stores are now creating their own flagship stores.  We’re even seeing strange entries onto the traditional High Street from brands we’d expect to see elsewhere in town – Volkswagen opened a store at the Bull Ring Birmingham in July 2017 and Westfield Stratford has seen exciting pop up concepts such as Kit Kat and Nestlé.

Furthermore “experiential” businesses are benefiting from the exodus of traditional retailers from the high street.  We’ve got a new client benefitting from this, The Climbing Hangar. Indoor climbing / bouldering is growing massively (as reflected by its inclusion in the 2020 Olympics)  and is a very popular social activity for 20 somethings as well as  families – whilst they’re not yet actually on the high street the same principle applies.

Retail has always been about the experience, but the model is now more complex.  No longer is it just about the right products, curated for the right customer, sourced and priced correctly and presented in the right way.

Retailers must now bridge the physical and digital experience – and to align all elements of their model to the customer’s desired experience.  Procurement has a part to play in ensuring that all elements of the retailer’s business model – from suppliers, delivery partners, landlords, and warehousing to eCommerce technology, brand and PR – can perform to a level needed in a sector where only the strong survive.