The impact of mobile on multichannel retail. The High Street
4The high street
High street losing its retail crown Other locations and channels are weakening the high street’s traditional dominance of retail 1994 2014 Gone are the days when the high street was the main port of call for consumers shopping needs. In the early 90s around three quarters of all retail 4.9% High street 12.3% spend made in physical stores was carried out on the high street. Since then the proliferation of OOT centres has diverted some of this spend to the 23.9% Neighbourhood peripheries of town and city centres. By 2010 the high street’s share of 40.2% physical store sales had fallen to 47.3%. Meanwhile the growth of online 50.2% commerce over the last decade has seen the high street’s share of total retail Out-of-town 31.7% spend fall from 49.4% in 2000 to 42.7% in 2010. 21.0% Non store By 2014 we forecast that the high street’s share of retail spend will have fallen by a further 2.5% points to 40.2%, mostly at the expense of more sales going 17.9% through OOT centres and online. Percentage share of total retail spend by location High street stores Neighbourhood stores Out-of-town stores Non store Losing share of spend: Losing share of spend: Gaining share of spend: Gaining share of spend: 42.7% to 40.2% of spend (2010-2014) 16.2% to 15.7% of spend (2010-2014) 31.4% to 31.7% of spend (2010-2014) 9.6% to 12.3% of spend (2010-2014) The high street will continue to be the Though neighbourhood’s share of spend Out of town remains a convenient and Retail spend through non store channels largest retail location. However it will lose will dip slightly between 2010 and 2014 the popular channel for consumers. Retailers continues to grow, mainly driven by the share going forward at the expense of long term trend is that there will be a especially of big ticket items and home growth of sales through the Internet. other locations and channels. resurgence in local shopping as consumers related goods will continue to open more Improvements in online offers, greater Migration of spend online for some look for convenience and concerns about stores in these locations as they provide flexibility in delivery and new technologies categories such as music and video will see local sourcing and food miles grow. Chain ample space to display ranges effectively including smart phones, will make these stores gradually disappear from the stores and independents are improving and rents are comparatively cheaper than shopping more mobile and convenient and high street. shop fits and store environments to cater high street locations. further drive more spend through non for growing local demand. physical channels.18
Location changes High street underperforming other locations The high street has always been at the heart of most shopping trips and will +4.4% 2000-2009 continue to account for a significant share of retail spend. However retailers’ location strategies are changing. Typical high street retailers are closing stores and consolidating their store estates as more sales go online. Other 2010-2014 retailers such as Mothercare are moving to OOT retail parks, where it is easier and cheaper to open larger footprint stores. In terms of physical stores more retailers are now reaching the consumer through out of town and this is +2.4% +2.3% reflected in out-of-town’s higher average annual sales growth over the last +2.1% decade compared to in-town locations. +1.5% +1.4% +1.3% High streets are the weakest retail location and have particularly struggled +0.8% over the last few years due to their greater exposure to discretionary spend compared to out-of-town and neighbourhood locations, which generate a larger proportion of sales through food. In 2009 high street sales declined Physical Out-of-town Neighbourhood High street 3.6% following the collapse of major chains such as Woolworths, Zavvi and Rosebys. While the location fared better in 2010 with sales up by a marginal stores stores stores stores 0.2%, the growth marked the weakest uplift in high street sales since 1991. Average annual retail growth and forecasts across shopping locations Space continues to contract on the high street and has worsened during the recession due to vacancy rates rising significantly as weaker players dropped out of the market. Between 2000 and 2009 space on the high street declined 2000-2009 2010-2014 by 8.9%, this compared to growth in out-of-town space of 34.0% over the same period. Looking ahead, high street space growth is set to decline by 4.0%, while out-of-town will grow by 4.8% as major retailers scale back on high street stores opting instead for out-of-town sites, which have +34.0% comparatively lower rents per sq ft. Bigger stores located out-of-town allow space for better merchandising and also provide parking facilities (often free of charge) close to store, a factor that is becoming increasingly important +4.8% -4.0% with the growth of Click and Collect services. -8.9% Out-of-town High street Out-of-town High street19 Space growth and forecasts Out-of-town vs. High street
Stores on the verge of a tipping point High street configuration will adapt as spend in some sectors increasingly moves online Music & Video Electricals The future configuration of high 1,600 90 6,700 45 streets will inevitably be impacted 80 by the growth of online 1,400 40 6,600 commerce. While the internet’s 70 1,200 35 share of retail spend is rising 60 6,500 across all sectors, the rate at 1,000 30 which it is eating up share varies 50 6,400 25 considerably. 800 40 6,300 20 600 The stores that are most likely to 30 15 disappear from our high streets 400 6,200 20 are the ones that are losing most 10 share to online. With the 200 10 6,100 5 digitisation of multimedia 0 0 content, the ease of price 6,000 0 2010 2011 2012 2013 2014 comparison and the general 2010 2011 2012 2013 2014 convenience of online, there will Online share Store numbers Online share Store numbers be less need for stores whose propositions are centred on technology and entertainment Clothing Health & Beauty products, which will lead to a big 41,000 14 14,560 6 drop off in the number of Music & 12 14,540 Video and Electricals stores in 5 40,500 high street locations over the 14,520 10 coming years. 4 14,500 40,000 8 Meanwhile clothing will continue 14,480 3 to be prominently shopped for in 6 physical stores as consumers like 39,500 14,460 to try on items before they buy. 2 4 Health and beauty stores will 14,440 39,000 always have a place on the high 2 1 14,420 street as many have diversified their offer to include services such 38,500 0 14,400 0 as manicures, hairdressing and 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 other types of activities that can’t be provided online. Online share Store numbers Online share Store numbers20 Store numbers and online share of sector retail spend. Figures of the left axis (blue line) indicate number of stores. Figures on right axis (red line) indicate % of online share of retail spend in sector.
The future of high streets What was once primarily a retail destination will gradually shift to become a place more for social and leisure activities and a hub for localness In next few years high streets across the UK are likely to see significant changes. While there are likely to be variances depending on different locations in terms of regions and whether they are secondary or tertiary, there are a number of aspects that are likely to become common place across high streets nation wide. The unique and innovative high street – While the clone town Britain label has been doing the rounds for years, we could see a reversal in this area as high streets become more tailored to local interests supporting local sourcing and local entrepreneurs to offer a more diversified and compelling shopping experience than out-of-town retail parks and malls. Pop ups and innovative The social and independent boutique style stores could leisure high street – As a greater become more prominent. proportion of retail spend moves online and to out-of-town locations, the role of the high street is set to change, moving away from being predominantly a The wired high street – As shopping destination to a more leisure- smart phone usage really picks up and the based centre. Coffee shops and high street becomes more leisure restaurants will continue to increase their oriented, wi-fi will become more in share of space on high streets to cater for demand as consumers spend more time the social spectrum. Retailers that remain socialising in the town centre. Coffee on the high street are likely to become houses have offered free wi-fi for years collection centres for online orders or act and now some retailers such as Tesco and as marketing tools to encourage O2 are beginning to offer it in their stores. customers to try products before they buy A shared free wi-fi service could be offered online. on high streets. Retailers and other tenants could work in collaboration with local councils to provide the service and use location-aware technologies to send targeted offers and discounts to customers for different stores as they stroll along the21 high street.