The state of retail: evolution and success
This is a guest post from James Miller, lead consultant retail and property, Data & Analytics Experian Marketing Services
Retail has been through a shaky few months recently, with closures hitting the headlines alongside online sales records being broken. We have seen big chains such as HMV and Blockbuster entering administration and being purchased, while the festive period saw online retail continue to grow in strength, with 2.8 billion visits to online retail sites in December 2012, up 30 per cent from 2011 (Experian Hitwise).
Much analysis of the decline of HMV, Blockbuster and Jessops focused strongly on the rise of online models. The new owners of Jessops have taken the growth of other channels such as online into account, opting to streamline the number of high street stores that are remaining open to key locations only, whilst ensuring that in-store prices match those found online. A multichannel programme such as this is designed to make the most of Jessops’ strong high street presence while offering shoppers the convenience of online.
While the convenience, growth of services on offer (such as Click & Collect) and the improvement of mobile services are all contributing to the continued success of online retail, the new approach by Jessops and the success of retailers such as Next and John Lewis, highlights that high street and online can work in tandem. It’s an approach that challenges the view that online retail will eventually be the end of high street stores completely.
DEEPER INTO THE DETAIL
Much attention has focussed on how online retail will be the death of the high street across the board, but this is a simplistic viewpoint.
At Experian we think a closer look is needed to really understand how retail is evolving.
HMV‘s downfall was undoubtedly remaining resolutely mass market in a sector where the mass market had migrated online. Had HMV moved to focus on more niche offerings on the high street while still working the online mass market it may have been a different story.
Blockbuster, which also went into administration in January, had a slightly different experience. It suffered significantly from the rise of businesses like Netflix and LOVEFiLM, who were quick to adopt both post-based rental services and live streaming services. The company failed to move quickly enough to address developing service delivery methods and ultimately did not establish a significant online presence that linked to its offline presence.
Clearly the common theme here is the bridging of online and offline presences – something both HMV and Blockbuster were unsuccessful in.
One essential thing that all retailers must remember is to not shy away from online retail facilities and services. As we detailed in our Town Centre Futures 2020 report and saw on the high street with HMV and Blockbuster, retailers must do the opposite and embrace online, linking it with their offline presence.
There are a number of ways that retailers can achieve this. Click & Collect services, where shoppers can order products online and then collect them in store, are showing huge promise. December 2012 saw Click & Collect services grow by 40 per cent, a saving grace for last minute shoppers. Another way is to provide online kiosks in store which allow a shopper in a physical store to peruse the online catalogue – which often has greater choice and stock.
Beyond linking these often distinct channels, retailers have to account for a changing population in order to thrive in future. UK consumers are getting older and are becoming increasingly savvy shoppers. In five years time Experian predicts there will be half a million fewer teenagers and young adults in the UK and in ten years time, three million more people in the UK over the age of 70. If high street stores are to continue to win customers, then they must fulfil the modern need for convenience and value of those with increasingly limited resources and incomes, but not to the detriment of quality and service, sought by older and more affluent consumers.
Digital technologies are also seeing the behaviours of the population change. Our insight shows that by 2018, more than half of the population in at least 500 UK towns will have become frequent online shoppers. This change has led to new, identifiable behavioural groups – for example there is a group of us who spend a lot of time online visiting news and information websites; and another group who are more than twice as likely to visit investment and premium banking websites than the UK average. Retailers must acknowledge this and target their customers properly, offering the right services that match their needs.
Local Authorities, Town Centres and retailers should also be working together to help revitalise high streets, whether that be by using websites or apps to drive people to retail centres using online discount vouchers or enlivening the customer experience through WiFi hotspots and the creation of virtual stores or online kiosks in offline places. A recent report on London, for example, conducted by the London Assembly‘s Economic Committee has suggested that councils need to look at access and promote pop-up shops to boost interest in the high street and increase footfall.
TRANSITION AND OPPORTUNITY
This has been challenging period and transitional period for retailers and the high street. To succeed, retailers must carefully plan the integration of on and offline operations, embracing technology to boost the high street experience and cater to the distinct needs of their local communities.