The inexorable growth in shopping online continues to put pressure on “bricks and mortar” retailers as is illustrated by the clothing and homeware retailer Next, which last week reported its third quarter full price sales up by 1.3% on the same time last year.
But Its High Street sales for the quarter were down by 7.7% compared with the same time last year while Next Directory sales rose by 13.2% compared with 2016 and 9.4% in the year to date.
Multi-channel competition from the likes of Amazon is forcing retailers to revisit their business models and the cost of retaining a High Street presence is causing them to struggle to keep prices competitive. Another problem is the time and cost of delivery, again under pressure from Amazon and its Prime next day delivery service.
Nevertheless, many people still like to go to physical shops for the social interaction and the opportunity to touch and see the products.
One solution retailers have chosen is to reduce the size of their estates but retain a presence on the High Street with smaller stores, marrying the display of a smaller selection of products with the Argos Style online ordering and delivery system, or moving into concessions in department stores.
Marrying “bricks and mortar” space with innovative technology
As the BBC programme The Disrupters, suggests, there may be more innovative shopping models to come.
One it describes is the Moby Mart, tested in Shanghai, where a marriage of self-drive technology and a mobile “store” can be summoned to the customer’s neighbourhood. They then enter the “shop” by swiping their mobile phone at the door, select products then swipe their way out again. The idea is still at beta stage so there is some way to go before it becomes a reality.
That the physical retail space still has its attractions is illustrated by the fact that the likes of Amazon have ventured into real-world bookstores as well as buying a US grocery chain, Wholefoods, with more than 400 High Street outlets.
Alibaba, too, has been experimenting with ways to keep a physical presence while keeping costs to a minimum.
One idea is their pop-up café, under the Taobao brand, using facial recognition software to identify customers who are than able to enter to pick the food they eat and pay using their mobile phone rather than to cashiers.
Finally, the rise of discounters, like Aldi and Lidl, has been inexorable. They continue to flourish and grow in physical retail spaces by offering own-brand, cheap but quality basic foods to undercut their rivals.
While ‘bricks and mortar’ retailers need to have a distinct proposition and provide a great service, convenience is a factor, but the battleground remains price vs perceived value. Getting it right will be a challenge and is one that Mary ‘Queen of Shops’ Portas still advocates despite recent claims that her “Save the High Street” campaign has failed following new figures showing that a thousand shops have closed over the past five years.