The dereliction of many high street stores and extensive media coverage of retail company insolvencies over the past decade suggests that the UK high street may be in terminal decline. Mitchell Wall, in Strutt & Parker's Research team, looks at the key to the high street's future.
The dereliction of many high street stores and extensive media coverage of retail company insolvencies over the past decade suggests that the UK high street may be in terminal decline. Mitchell Wall, in Strutt & Parker's Research team, looks at the key to the high street's future.
Commentators have often attributed this to competition from online retail and large out of town retail parks combined with the weak economic performance of the regions. This raises the concern that the high street may eventually be reduced to a stagnant strip of tarmac occupied by charity shops and salons in many areas, providing little or no retail experience for the consumer.
What we expect to see is the high street being increasingly driven by lifestyle and service orientated retailers. A study by Eventbrite in 2014 highlighted that Generation-Y and the Millennials are turning away from materialism and traditional measures of success, and instead focusing their disposable income on experiences. Retailers offering these services could be such establishments as 3D printing cafés or microgyms. Microgyms, for example, focus on a small number of activities, typically occupying small facilities, suited to the high street, and operating a low cost model with more classes and less equipment. This is a more personalised, value for money service, as opposed to the ‘one size fits all’ approach of the big box gyms. In 2014 the national Health and Fitness Omnibus Survey (HAFOS) carried out a street based study of more than 1,300 people throughout England and Scotland, which looked at people’s attitudes toward health and fitness. The study found that 57% of women and 50% of men preferred the microgym low cost model, which also appealed across all age groups. Mintel, a market research company, have suggested that large gym operators have started ‘infilling’ with these smaller clubs, much like the large supermarkets did with the convenience store, servicing local neighbourhoods on the high-street (Health Club Management Handbook, 2015). David Lloyd Leisure has already capitalised on this trend with the launch of DL Studios which occupy high street locations in places like Winchester, Islington, Enfield and Putney, with plans to expand further across the UK.
Presently, 3D printing is really only found in the fringe areas of the capital but the service has the potential to further expand on the high street. Big retailers like Argos are already trialling with 3D printers for jewellery, which although in its embryonic stage, could become the status quo for its high street stores. MakersCafe, a 3D printing café, in Shoreditch is another real-world example, providing a space to work and socialise in the same place at the same time. The same is happening across Europe with the likes of Dimension Alley in Berlin and FabCafe in Barcelona. In Canada, public libraries have even begun offering 3D printing services to educate the public about the new technology. The adoption of this technology for retailers is about creating an experience for the consumer, which could be one of the answers to driving higher footfall on the high-street.
Google Trends, Index of Searches
The continued digitisation of the retail market is typically seen as the single greatest threat to physical stores, especially with UK online retail sales growing 15.8% in 2014 and forecast to grow a further 16.2% in 2015 (Centre for Retail Research, 2015). Now, however, strategists are increasingly seeing that, given some of the difficulties retailers are experiencing with the home delivery market, physical and online retail will in fact complement each other. The UK is the biggest user of click and collect services and the use of such is expected to double within the next 3 years (DCLG, 2015). A survey by Retail Assist in June 2015 also supports this trend, as it found that 40% of Gen-Y respondents (those aged 15-35) use click and collect once every 3 months and 28% use it once a month. The survey highlighted that hidden delivery charges were a big barrier to purchases and so low cost convenience options such as click and collect are a high priority. The Google Trends graph below further highlights the growing popularity of this service, with click and collect searches (red line) being non-existent prior to 2011 but then increasing significantly in the last 5 years.
The Retail Assist survey also found 40% of Gen-Y respondents favoured shopping on the high street and 40% favoured online. In total 92% used an omnichannel approach to retail. As such we could see retailers change the way in which they use their retail space, gradually shifting towards a more showroom model with click and collect services to meet the needs of consumers. Indeed the UK Government has already taken note of this, announcing that from 15th April 2015 retailers will be able to install click and collect lockers without the need for planning permission. Further to this, the DCLG has already made changes to the planning system, enabling retailers to increase the size of existing loading bays by up to 20% to make deliveries easier.
If there is anything we can take from this is that the high street is not going away anytime soon. This is not a matter of the high street against the internet. The trends discussed show that the high street is entering a period of change where the likes of 3D printing, microgyms and click and collect stores will create a more service and lifestyle driven retail environment.