The Death of the High Street: Reasons & Hopes for the Future
A series of high-profile collapses and CVAs in recent months are clear signs of the challenging conditions currently facing the UK High Street. While many retailers are facing falling sales and increased overheads, it is the stores that fail to adapt to changing consumer habits, such as Toys R Us, which end up paying the […]
A series of high-profile collapses and CVAs in recent months are clear signs of the challenging conditions currently facing the UK High Street. While many retailers are facing falling sales and increased overheads, it is the stores that fail to adapt to changing consumer habits, such as Toys R Us, which end up paying the price.
By putting a strong business strategy in place to harness the growth potential of e-commerce channels, retailers can mitigate the risks posed by their rising cost base and stay ahead of competitors in this fast-moving industry.
Increased consumer caution, food price inflation and wage stagnation have all contributed to High Street incomes being squeezed. Factors such as the increased National Living Wage and minimum pension contributions, when combined with the introduction of the apprenticeship levy and higher business and property rates mean that many retailers are facing higher overheads than ever before.
The growth of the ‘bricks-to-clicks’ phenomenon has been accelerated by the rise of the ‘on-demand economy’, with consumers less willing to wait to get their hands on goods and more online retailers offering same-day delivery. Developments in technology have also streamlined the online shopping experience, with processes such as returns now easier than ever before. As a result of these changes, it is no surprise that footfall on the High Street is falling, with many shoppers choosing to avoid the crowds and find products at a competitive price online.
With consumer habits changing rapidly, it is essential that retailers build their business models accordingly. Toys R Us is a prime example of a chain which failed to move with the times. As well as relying on large, highly-stocked warehouses, which proved costly to run, it failed to invest in the development of an effective online sales channel with expedited shipping options. Securing access to customer data, via methods such as targeted marketing, will allow retail businesses to adapt quickly to new trends before they are able to have a negative impact on sales.
A number of retailers, including Mothercare, have recently announced an intention to secure a company voluntary arrangement (CVA), which could allow them to restructure their finances and agree voluntary repayment schemes with creditors on a one-to-one basis. Helping the business to continue trading and the existing management team to retain control during negotiations with creditors, this route is often viewed as a more attractive option than pre-pack and other types of administration. However, large numbers of empty stores could have the effect of driving more consumers online, away from the High Street, as well as increasing the likelihood that local councils will try to raise business rates to account for the potential shortfall in payments.
Taking action at an early stage to negotiate shorter leases with landlords could enable retailers to cut costs. Additionally, allowing companies to take advantage of the most profitable times in the retail calendar and hire staff only when needed, pop-up stores could reduce costs and increase flexibility.
Consumers are increasingly treating bricks-and-mortar stores as ‘showrooms’, allowing products to be viewed first-hand before finding them online. With this in mind, retailers should employ a joined-up approach, with on and offline sales channels. If businesses are going to encourage repeat business and meet consumer expectations in the future, simply offering a website is no longer enough. It must complement or even enhance the in-store experience, whilst reflecting the brand identity and being quick and easy to navigate. For example, we may see more customers venturing into stores for product advice, supporting the overall decision-making process, before carrying out their transactions online.
As e-commerce delivery slots become shorter and shorter, it is increasingly important for High Street retailers to have a strong logistics network in place, especially around Christmas and other key times in the retail calendar. Locating reliable local suppliers could also help to ensure supply chain agility, facilitating short lead times whilst allowing stores to vary their purchases depending on what is selling well.
While there is no doubt that these are challenging times for retailers, physical stores will continue to play an important role as part of the consumer buying process. For this reason, the High Street is unlikely to disappear completely. By heeding shifting consumer habits and adapting their business model accordingly, retailers can stay ahead of the curve and secure their position in the High Street for many years to come.