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26 June 2019 0 Comments
Posted in Opinion, Retail & Leisure

UK retailers reveal the biggest threats and opportunities for their future

Author headshot image Posted by , Senior Associate

We have recently conducted the survey of 50 retail business decision-makers where we asked them about the biggest challenges they face, the relationship between online and bricks and mortar retail and the factors that may give brands the edge in the next five years.

The biggest challenge

It’s obvious, you may say – it’s online shopping! But, online threat aside, what else?

In a result that is not surprising, 61% of retailers said that increasing rent and business rates are the single biggest challenge to the high street. That was followed by reduced footfall (19%), pressure to discount (11%) and reduced consumer confidence (8%).

Actually, rents have fallen by 59% in real terms over the last eleven years, “UK Town Centres: what’s next”, a research report by commercial real estate brokers Cushman & Wakefield states. Compared to 2018, rent as a proportion of comparison spend also fell from 12.8% to 10.2%, which is an indication that rents are beginning to adjust to more sustainable levels.

The message is loud and clear: it’s not the rents as much as it is the business rates, which in many high street stores now exceed the rents. Retailers are working hard to improve the customer experience, however the Government needs to do its bit to help the high street. A reform of our outdated business rates regime can’t come soon enough.

Clicks and bricks

We’ve become very used to talking about high street vs online shopping, but what if you combine the two? Research by the International Council of Shopping Centres found that when retailers open new stores, they experience a 37% average increase in web traffic. The inverse also holds true: closing stores causes a drop in the share of web traffic.

In our survey, 28% of retailers believed it is important to ensure that digital and offline are integrated. However, more retailers – 42% – viewed online as primarily a threat and backed calls for a new sales tax on internet giants to level the playing field between online and bricks and mortar.

The future edge

When asked what will give them the edge in the next five years, a clear majority, 64% of retailers, picked experiential retail. It is no longer sufficient to have a shop where customers can walk in, buy products and leave; “retailtainment”, the fusion of retail and entertainment, is a new buzzword. Retailers need to use the physical space to provide fun, unique, Instagrammable experiences that make shopping more than shopping.

Another factor that retailers believe will give them an edge is environmental reputation. Waitrose announcing its ‘Waitrose Unpacked’ scheme – which will see products such as rice, coffee and pasta sold loose in dispensers, while frozen fruits will be offered as a packaging-free ‘pick and mix’ – is definitely a clear sign of where the market is headed.

Waitrose’s initiative is likely to be welcomed by the environmentally-conscious millennials and Generation Z. These shoppers are so sustainability-conscious that they have – you guessed it! – an app for it. “Good On You” is described as an ethical fashion app and is seen as a world-leading source of trusted brand ratings, articles and guides on ethical and sustainable fashion. It gives users the power to check brand ratings while they shop; over 2,000 brands are rated “we avoid”, “not good enough”, “it’s a start”, “good” and “great”. Supermarkets are not yet on the app, but the trend is clear.

What’s more, Waitrose’s initiative is good both for the planet and for our wallets: produce in the unpacked refill stations will be up to 15% cheaper.

 

To find out what other factors retailers identified as positive and negative in our poll, take a look at our infographic and for expert commentary and advice, get in touch with our specialist Retail sector team.

020 7583 2222     Email usenquiries@roydswithyking.com

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