2018 wasn’t the best year for the UK high street with the demise of many household names such as The House of Fraser, HMV, Maplin, Toys’R’Us, Poundworld and many more.
In fact the Centre for Retail Research stated that 148,132 UK retail jobs were lost as approximately 20,000 shops and restaurants closed their doors. And 2019 isn’t looking much more promising for the UK retail sector as in January we are already seeing the likes of Patisserie Valerie, OddBins and Wine Cellars, Chapelle Jewellery & Watches and Hardy Amies to name but a few, going into administration.
Watch the news or take a walk down one of the many ailing high streets in the UK and you may sense a feeling of apocalyptic doom. Boarded up windows, signs proclaiming ‘closing down sale’, there’s a distinct feel of tumbleweed rolling through ghost towns of once prosperous high street shops. The finger of blame has swung in many directions – Brexit, online shopping, extortionate car park charges, the tightening of purse-strings, a result of years of post-recession austerity, lack of customer service…. even the weather! It is certain that many factors have influenced the decline of high street retail sales. Digital and particularly mobile, has had a massive impact – the growth that online sales has experienced over the last decade, for example with the domination of e commerce giants such as Amazon and ASOS, has undoubtedly played a major part in the decline of UK retail.
Many retail sector CEOs have outwardly blamed the demise of their company as being completely due to competition from cheaper online rivals. However, the reality of the situation is a little more complex than this. Undoubtedly online retailers do not have the overheads associated with a physical high street presence (especially a retail company with multiple site locations). But, they still have the the expense of complex logistics such as supply chain and delivery costs, and the cost of fighting in the battlefield that is online marketing where you always need to be one step ahead of the game to survive. Couple this with the fact that statistics show that consumer spending has grown consistently since 2011, and this positioning is beginning to look rather like a poor excuse. It seems that each retail chain that goes out of business trots out this excuse in a ‘cut and paste’ format, when in fact a large part of the problem is that high street retailers are reluctant to change with the times and adapt to consumer buying habits.
The time to adapt is now!
Without doubt, changes in buying behaviour were a direct result of innovation and disruption by online retailers. As some people have become more at ease with online purchases, others still prefered having the ability to physically touch, taste, smell and see a product before purchasing. In fact the average consumer doesn’t necessarily ‘favor’ digital over physically shopping in store, or vice versa.
Therefore it could be thought that ultimately online retailers would lose out to their high-street competitors, despite the fact that in many cases they can offer products at lower prices. However, this hasn’t been the case and a pattern has emerged amongst the larger retailers/retail groups that have gone out of business – that pattern is a lack of focus on digital growth, and a lack of adaptation.
So how can high street retailers begin to fight back against the surging popularity of e-commerce and m-commerce? In order to fully benefit and survive in this digital age retailers must fully embrace technological change and offer a seamless customer experience.
Spearheading this seamless customer experience is Omnichannel retail which is predicted to be on the rise in 2019. This is basically a multichannel approach to sales that seeks to provide customers with a seamless shopping experience, whether that be shopping online, by telephone, mobile applications or the bricks and mortar of a high street store. Omnichannel has now superseded multichannel as it allows companies to engage more closely and more effectively with customers so engendering brand loyalty. It is also widely held that customers prefer the opportunity to engage with a retailer through several avenues at the same time for a more complete experience.
With the rise in omnichannel retailing, high street locations will take on important roles in terms of showcasing products, shipping, customer services and promotions. In a survey by ConnectPOS, 82% of UK customers said that they preferred to buy expensive/luxury items from an actual high street store as opposed to from a web store. The reason being that they felt more secure being able to actually see and handle the goods that they were purchasing. So it would seem that in 2019 and beyond we will see a new role emerging for high street stores in these more specialist sectors where customer experience is paramount.
Alongside the emergence of e-commerce it must also be remembered that customer demographics have also changed. The online environment is a natural habitat for today’s 20 to 30 year old shoppers who have grown up immersed in the digital era of social networking and online content. These ‘millennials’ now have spending power and disposable income, so naturally they look towards the internet as the place to spend it but they also value user experience (UX).
Many millenials don’t have the spending commitments that come with having a family to support children, and in fact many have completely different money priorities. For example, the rising cost of house prices outstripping pay increases means that many millennials are giving up on owning a home. They do not want to be tied down to financial restrictions that saving for a mortgage deposit brings so giving them more spare money.
With this greater spending power, it would be thought that high street retailers would be doing all they could to attract the wallets of this demographic. However looking at some of the major high street retail chains that have gone into administration recently, it seems that quite a few have completely failed to understand this demographic. Online retailers don’t just appeal to millennials as consumers but many have also actively embraced them as part of their workforce which is a great way to get a better insight of what makes this group tick.
Those high street retailers who have been quick to embrace trends, invest in websites and digital assets to make the customer experience as easy as possible, are those who are currently doing well. For example retailers such as John Lewis, Next and Currys PC World, have developed strong online presences, integrating the online buying experience with the physical shopping experience using “Click and Collect” and in-store returns, and effective targeted marketing aimed at these younger generations.
With so much more choice for customers now, a vital factor is who can give their customers the ‘best’ experience. With greater choice comes increased customer awareness of alternatives to your product, and while price is obviously a pretty major factor, it’s now not the be-all and end-all.
With products such as clothes, cosmetics, shoes etc., which you would expect the high street to steal the march on, online retailers have made huge strides toward removing the associated purchasing ‘pain points’. Many have invested heavily in ensuring that their delivery process is quick, reliable, and transparent and that their returns process is as easy as possible. For example, Amazon Prime offers one day delivery on many items and now has over 100 million subscribers. What sets these types of online businesses apart from their high street counterparts is their ability to:
- Adapt, and to adapt quickly
- Innovate, develop, and grow
- Develop products and features that meet the needs of their customers
They have used e-commerce to build customer loyalty programmes and referral incentives and have focused on creating a story around their brand. Turning the simple process of a customer receiving their order into an complete user experience. In order for high street retailers to survive this ability to quickly identify threats and capitalise on opportunities will become even more crucial as e-commerce grows even bigger.
As discussed, 2019 is all about user experience. One of the key trends that will be driving UX in the retail sector is the use of mobile apps, and high street retailers need to embrace their use as much as their online counterparts.
Mobile Apps have been shown to be far more effective than messaging and emails in promoting offers, upselling, building brand allegiance etc. They can also be used to create a personalised customer experience and are an excellent way to glean data for CRM and consumer insights.
According to a recent report by mobile analytics consultant App Annie, in 2018 the average mobile user spent three hours a day on mobile devices, there were 194 billion apps worldwide, and the amount of time spent on mobile shopping apps increased by 60% to 18 billion hours. In fact in the UK, consumer spending via mobiles grew at a faster rate than overall GDP.
The report by App Annie also revealed that apps from digital-first (e-commerce) retailers generated 1.5 to 3 times more average sessions per user than apps from bricks-and-clicks (high street) retailers. However, in 2018 many bricks-and-clicks retailers have made great headway in closing this gap. For example, sports brand Nike has developed its mobile app to leverage UX with innovative and engaging options for in-store experiences such as accessing rewards, reserving sizes in-store, and receiving assistance from an in-store employee if needed.
To date digital-first retailers have generally done a better job of targeting and catering for the needs of mobile/digital shoppers than their high street counterparts. However, many bricks-and-clicks retailers are now beginning to embrace mobile’s transformative power – through m-commerce and enhanced in-store experiences — to grow their top line and to rise to the challenge of 2019 being the year of customer experience. Those that do not embrace this will simply drop by the wayside.
So is the UK retail sector dying a death at the hands of e-commerce?
No matter how much we may imagine a time where we live in a purely digital world this is highly unlikely. The reason being human nature, despite having access to digital services that mean that we never actually need to leave our homes, as humans, we naturally feel the need to exist in a real physical world, to go outside and to interact. This inert human need means that whilst it may be currently ailing, the UK high street retail sector will never die.
Whilst we now live in a world that is online-first, this doesn’t mean that we are online-only, all that is happening is that the balance is shifting to be online first and offline second. This means that the bricks and mortar high street stores will still have a crucial role to play in the strategies of multi-channel retailers, for example, a physical store presence still has a huge impact on brand reputation. When consumers have a positive experience of interacting with a brand in the ‘real’ world, their trust in that brand increases. People like the reassurance that they get from knowing that the products they are buying exist outside of their mobile/tablet/laptop screen. Therefore the new primary role of the successful high street store will be to provide support to online sales through UX meaning that offline sales will become a secondary income stream.
For 2019 and beyond experts predict that high street retail stores are no longer going to be the money-spinners they once were. However, they will still have a place offering great value to consumers in terms of brand interaction and UX touch points. Plus they will provide access to customer information that businesses would be unable to glean purely from looking at online behavioural data. This is of course with the proviso that they adapt and embrace digital technology.
So to summarise, whilst the high street retail sector may be down on its luck it is simply that, down but NOT out! And by a very weird twist of fate it is looking like e-commerce could well be going to save the beast of high street retail that it once looked like it was set to slain.