There are challenges facing the high street today from business rates to online retail - how will retailers face these challenges in 2015?

You don’t need Mary Portas to tell you the UK high street is not what it once was. The retail industry has been wringing its hand over escalating vacancy rates and the wave of charity stores, discounters, and bookmakers that have flooded the high street in the wake of departing retailers.

Add to this the stagnating demand from consumers, the shift from store-based retail to online, onerous business rates, misaligned parking charges and assorted tax loopholes - all factors that have created a challenging environment for high street retailers.

Interestingly, the retailers we canvassed for our Winning the Retail Battle in 2015 report, in partnership with global law firm Squire Patton Boggs, differed in their outlook on physical stores: 46% suggested they will need fewer stores, compared with 54% who said their future strategies rely on more stores.

This view is coupled with an improved economic environment for shoppers, but the slight uptick in sentiment doesn’t necessarily translate into immediate retail recovery.

We are a long way from the devastation of mass store culls and job losses of 2008-2011, but there is a pervading sense of attrition, with many retailers – such as Dixons and Arcadia – preferring to let leases lapse to manage their store portfolios.  

Even the big supermarkets are not bulletproof. Goldman Sachs suggested in late 2014 that the Big 4 might need to close around 20% of their stores to remain profitable. The new Tesco CEO Dave Lewis has clearly taken this on board, announcing it will close 43 stores this year, and Morrisons is also planning to close 10 stores as their chief exec Dalton Philips steps down, after reporting falling sales during Christmas.

Despite this sense of gloom, there are pockets of growth: discounters in particular are hungry for new stores, while major food retailers continue to open convenience stores. Sainsbury’s, for example, plans to continue opening 100 new c-stores per year, while general discounter B&M has long-term plans to more than double its estate from 400 to 850.

Another key trend is the ongoing – and essential – convergence between retail, leisure and food service. The success of Westfield in London and the recent Trinity Leeds scheme show that a well-curated mix of retail, restaurants and leisure still creates a compelling destination for shoppers.   

From a consumer perspective, stores remain important. Half of the shoppers we surveyed for our report said they preferred to shop with online retailers who also operate physical stores. Most shoppers incorporate stores into an elongated path to purchase – nearly 80% of those we polled noted that a visit to a physical store is usually preceded by online browsing. 

There is a very real sense that the UK is ‘over-shopped’, as seen by empty properties on high streets and in shopping centres nationwide. However, well-located, properly-managed physical stores will still play a pivotal role in 2015 and beyond, for both shoppers and retailers.

The Winning the Retail Battle in 2015 report has been produced by Kantar Retail and Squire Patton Boggs in partnership with the British Retail Consortium and the Retail Trust.

  • Bryan Roberts, director of retail insights, Kantar Retail