Analysis: It’s not all doom and gloom for stores in 2018

The continued growth of ecommerce means that existing store space is being scrutinised for efficiency gains and shop-in-shops are on the rise, as seen with the latest concession trial between Next and Tesco.

While the pressure on stores is not new, it underlines how the role of bricks and mortar is evolving and how retailers should adapt.

Provide other reasons to shop in-store

Shoppers are smarter – they’re savvy and browse for deals online.

Stores are struggling to compete against online when it comes to range availability, price and accessibility, especially when it comes to mobile.

Therefore retailers need to provide customers with other reasons to shop in stores, such as value-added services and convenience through click-and-collect.

“With the growing proliferation of automation in the sector, retailers are turning to store staff to retain the human side of retail”

John Lewis’ recent store opening in Oxford encapsulates this. It focuses on services in retail, including a customer technology training room, personal styling and eating aplenty.

With the growing proliferation of automation in the sector, retailers are turning to store staff to retain the human side of retail.

Debenhams’ boss Sergio Bucher has changed its recruitment strategy to focus on attitude rather than career history. Consequently, many of its latest recruits have been drawn from the hospitality and service sector as opposed to the retail industry.

New conflicts

The latest conflict on the high street is brands going direct to consumer. There’s been a flurry of store openings – and planned openings – by brands over the past year including Smeg, Dyson and Microsoft.

These stores are experiential. They’re often viewed as a marketing exercise, and store profitability is not a top priority. It allows them to control the brand experience and gather customer data first-hand.

The latter can be challenging in store, although Wi-Fi prevalence allows stores to identify customers and provide push notifications. But investment across the store base can come at a hefty price compared with the online channel.

Brands, discounters and pureplays

There are three main groups that can be expected to open stores in the UK over the next few years: brands, discounters and online retailers.

We can expect more brands going direct to consumer. Tesco’s pushback against Unilever’s proposed price hikes in 2016 exposed tension over brands wanting to have greater pricing power.

“Retailers that combine their digital and physical channels – as well as provide a consistent brand experience – are more relevant than ever”

Discounters thrive when consumers are budget-conscious. Since the referendum, B&M has upped its target to 950 UK stores and Aldi has committed to 1,000 stores in the market by 2022.

Meanwhile, John Allen, chief technology officer at former pureplay Missguided, once said: “Online-only brands are small. If you want to be a big player, you’ve got to be multichannel.” This sentiment will not change, especially in categories where touch and feel is important.

That is why Missguided, and other retailers such as Made.com and Oak Furniture Land, which originated online, have since moved into the physical space. Incidentally, they are among the top 10 fastest-growing retailers in the UK.

Retailers that combine their digital and physical channels – as well as provide a consistent brand experience – are more relevant than ever.

Focus on what Amazon can’t do

Amazon has conditioned shoppers and raised expectations of what retailers should offer. It’s growing in the physical realm as well, most recently through the acquisition of Whole Foods Market to make strides in the bricks-and-mortar grocery space.

But the question in the boardroom has evolved. Instead of asking “how can we match Amazon?”, chief executives are thinking about “what is it that Amazon cannot do?” as they develop their strategies.

This is where bricks and mortar can stage a coup. Driving upsell by immersing shoppers in an experience that is unforgettable is more difficult to replicate online. Indeed, retail theatre is often best played out in the physical space.