As customers demand more services and retailers keep reaching for their ‘holy grail’, the future of retail is becoming harder to predict.
Back in the 1960s and 1970s the biggest problem we were confidently told was that we would all have too much leisure time and not know how to fill it.
How wrong can you be? Today’s lifestyles are all geared to being time poor with digital connectivity and ever rising retirement ages meaning work never stops. Retailers must increasingly focus on convenience and ever shorter delivery times.
So what to make of the following statistics? Last year sales of books rose while e-books declined, sales of music CDs and vinyl rose, while Amazon is thought to be planning to open up to 400 bookstores.
Is the books and music market subject to different rules to other merchandise categories? Perhaps, for books and music the main impetus to purchase is to physically see a title in reality and actually handle it.
This direct contact is substantially higher than any other motivation such as social media or word of mouth. Neither are books nor music a necessity or distress purchase (except perhaps at an airport shop), nor are they exciting enough to fuel enthusiastic online searches.
I’m sure that I am not unique in finding that browsing on Amazon is not a pleasurable leisure activity – sheer fatigue soon comes over me. I’m reminded of that joke: How do you make something invisible? Put it on page 17 of an internet search.
But is it good news?
Now like everyone else I had forecast a massive increase in store closures with shop vacancy rates rising to around 30%. Yet in 2015 shop closures were the lowest for five years and overall shop vacancy rates have not risen materially above their pre-credit crunch levels. This is good news isn’t it?
Well, in practice, it is the worst possible scenario for store-based retailers as their inherited cost base plus wage and rate increases is impossible to support if you are attempting to give consumers everything that they now perceive to be ‘normal’ – ie, next-day delivery and the option to collect in store.
A seamless multichannel experience may be today’s retail ‘holy grail’ but for the retailers themselves it is economic madness.
It is of course the delivery of this holy grail that is the prime rationale for the Sainsbury’s move on Argos – “( it will) bring together multichannel capabilities and delivery networks for fast, flexible and reliable delivery to store or home across a wide range of food and non-food products”.
“Something has to give, particularly when flatlining growth is the new norm”
Does this make the proposed acquisition madness? Something has to give, particularly when flatlining growth is the new norm.
I suspect it is this reality that lies behind Simon Wolfson’s recent downbeat update on trade.
But for the vast majority of store-based retailers I see no alternative but massive painful restructuring and/or bankruptcy.
As the song goes ‘you ain’t seen nothin’ yet’.
- John Richards is an independent retail consultant and non-executive director