3,500 UK high street are under threat as retailers battle to save their £300bn bricks and mortar
“In buoyant times, even poorer performing stores provided some contribution to sales and margin but the balance between sales and costs has shifted and retailers now have to re-evaluate,” says Helen Mountney, head of Kurt Salmon’s retail and consumer group in the UK. “Even in ‘the good times’ the UK has had a lot of retail space so it is inevitable that in this tough and more technologically-driven climate we are going to see more closures as retailers cull their under-performing stores from their portfolio - in the past three years, shop vacancies have tripled*. In a number of cases loss-making and profit-marginal stores can make up a double-digit percentage of the portfolio and over the next three years, there will not be a high street or town centre that will have not changed in some way as retailers look to reinvent themselves and their relationship with the customer.”
According to Kurt Salmon, retailers are going to have to focus on providing a more exciting high street store environment, better service, and a more localized offer – and it’s going to be critical for many that they learn how to be a truly multi-channel operator, fully using the role of each format and contact point, to deliver profitable growth.
Although major retailers are looking to grow their online sales (£59bn in 2010) many are turning their attention to opening stores overseas, a key component of any growth strategy must remain driving incremental sales by sweating and reinvigorating their existing assets - traditional bricks and mortar outlets which represent 80% of sales, almost £300bn.
“Retailers can’t afford the high street to die but it will need to be reinvented once again. When the traditional corner shop was closed because it did not offer what the consumer wanted it was replaced in time with convenience stores. Department stores have reinvented themselves. Now it is the turn of the multiple operators in the high street: and at a minimum they need to look at their high-performing stores by location and location type, find out what makes them best in class and replicate that throughout their estate. Significant turnarounds in performance are possible if each store is matched to its market – but once a store is opened (and until it’s due for a refit) many retailers tend not to take an aggressive structural approach to the issue. Recent changes make this imperative.
“Retailers can no longer have a ‘one size fits all’ approach to their product offer. They need to have real insight into their customers and ‘localise’ the product range and the layout of a store so that it is compelling to people in their catchment area. They also need to add more theatre and excitement so that there are compelling reasons for a shopper to venture into the high street rather than order what they want from their mobile or laptop,” adds Mountney.
“High street operators may also need to work together - for example providing joint delivery services and promotions - and they will in many cases need to lobby local councils to remove some of the barriers to shopping –such as cost, accessibility and availability of car parking – if they are to preserve the value of town centres. In some towns a more creative solution to keeping the shopping choice alive will be to incorporate shops within their leisure complexes.”
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