A showroom with a view – the future of high streetsPosted: March 15, 2012
Frankly, you could cancel most of the drama series on TV nowadays and instead stream a live tale of everyday retailers into the nation’s homes. Tesco, Peacocks/EWM, Game, Iceland and many others are all delivering stories of real tragedy (job losses), hubris, separation and (in Malcolm Walker’s case) triumph.
It’s edge-of-the-seat stuff, and today’s sensational news of Richard Brasher’s exit from Tesco is just the latest exciting plot twist. Furthermore, this is interactive experience, as customers are the ultimate arbiters of who succeeds and who fails.
It’s also a tale of legacy and inheritance – too many stores in the wrong places, old management styles or an immature multichannel offer all presage disaster ahead. Stand by for next month’s Titanic metaphors…
Last Friday’s Retail Week devoted several glossy pages to a gallery of multichannel leaders from across the sector, representing companies as diverse as Harrods, Sainsbury’s and Wickes. In a very short time, “multichannel” is moving towards “omnichannel” (thanks Gareth), as consumers move faster than stores to blend their online, mobile, and bricks-and-mortar shopping activities. The customer is always right, and – frustratingly for both parties – the customer is now often several steps ahead of the retailer.
The more this snowball gathers speed, the more quickly prescriptions about the high street become out-of-date. So here are a few thoughts, wrapped around a simple statement:
Showrooming is here to stay
At least it is for as long as the showrooms can remain open. But the ease with which customers of all ages have embraced comparison shopping, and the unemotional way they’ve ditched their old loyalties in favour of better value in tough times, has come as a nasty surprise to many retailers.
You spend years building your brand, extending your storebase, cementing a reputation for value and/or service and then, without so much as a Gerald Ratner speech, the whole house of cards is blown away, and the company is left not with a proud legacy, but a horrible mess of bank debt, unprofitable shops and over-complicated management structures.
Nevertheless, customers enjoy showrooming, and no large retailer can succeed in the future without an integrated offer that recognises stores are showrooms. It needs to have few enough of them, in cost-effective enough locations, for the whole P&L equation to add up. John Lewis Partnership (reported last week to be investing £450m in “growth and multichannel leadership”) will build its JL and Waitrose online offers, not as “alternative stores”, but as an integrated part of their consumer offer.
Companies with an optimum number of stores can integrate their online commerce/service offer with bricks and mortar and move forward. But – and this painful – not enough stores are being closed, yet. This in large part is due to the challenges leaseholders face when managing their real estate legacy – leases are long, penalties are onerous, and landlords are struggling to see where replacement tenants will come from.
Winners and losers
Leaving the food sector to one side, I envisage a future where large, successful chains, selling unique merchandise, are able to sustain a reasonable sized store-base, with customers using the brand’s services through any combination of physical and virtual contact points. These companies will be able to leverage their use of technology to stay ahead of their competitors, but they must always look forward. Retail legacies are of no more real value than the beautiful company histories that retailers used to commission – interesting for the archivist, irrelevant to the customer.
This means embracing technology that has the capability to kill much of your bricks and mortar offer – because if you don’t close down your weakest branches, someone else will shut down the whole lot.
As an example, one techology that has been talked about and tested for a long time is the virtual changing room. This is a great gadget for boutiques – but can you imagine the fractious queue for the magic mirror in a small provincial Top Shop on a wet Saturday afternoon? Much more efficient to provide the technology as an app that customers can use through their online-enabled 42″ TV screens in the privacy of their own homes. I can easily envisage “magic mirror parties” at home – much more fun than a chick-flick.
Winners will run forward with new applications, and will be unsentimental about store closures. They’ll have uniqueness on their side – must-have products available nowhere else. Physical shops will still matter, but they won’t be required in the numbers that they have been historically, adding weight to the “fewer, better stores” trend.
There will be more losers. If you’re selling branded merchandise available from multiple suppliers, if you’re selling products manufactured in the Far East and sold, unchanged, around the world, if you’re selling a product with limited touch-and-feel qualities, if you’re selling generic or commodity products, then the road ahead is a very thorny one. Is marrying Comet and Game likely to be a good idea? Rephrasing the question, and assuming (rather rashly) that both business’s unwanted legacy real estate can be disposed of, are the brightest and best within Comet and Game able to focus on a future in which physical stores are just a part (a small part), and leading-edge technology will enable them to sell more products, more effectively and more profitably, than Amazon?
We have moved on very quickly from dead record shops and dying book shops. Any sector, any shop, that cannot provide a vivid reason for customers to continue to shop there starts to look like a showroom for online brands to exploit. (Shortly afterwards, it looks like an empty store.) But does this mean (roll of drums) the Death Of The High Street?
I think not. It means the radical reshaping of the high street, though, and without getting all butchers-and-bakers-and-candlestick-makers, it does mean combining the best of the past with the most desirable elements of the future.
It means far fewer shops – 20% less, 30% less? The number will vary depending on the prosperity and lifestyles of the local customers, or the effectiveness with which that high street (or shopping centre) can act as a regional or national magnet. But the good town centres of the future will either be local, or super-regional – in-between won’t stack up anymore.
It means a high street which (as the supermarket chains have figured out) provides the staples you need in a hurry, and (as the best independents have figured out) a choice of goods that you simply can’t buy anywhere else.
It means a high street that provides entertainment, community, and relaxation – not one where hours are spent in unpleasant shops, buying commodity goods. There’ll be more meeting up (facilitated by phone, of course), more coffee, more chat; more escapism, more novelty, less stress. Because there are fewer shops, there’ll be less traipsing. Parking provision might even improve (well, I can dream – though more shoppers’ buses would be welcome).
Manufacturers will run showrooms – if the value chain in many categories has eliminated the margin a physical retailer requires, then technology companies, for instance, will have to follow Apple’s lead and provide opportunities for consumers to see their goods, prior to buying them at the best price from whichever online supplier works best for them.
So the future of the local high street becomes a blend of entertainment, uniqueness, staples and showrooms. Customers would appreciate this, but it would require some categories to disappear completely, and others to reinvent themselves. Can the retailers, the landlords and local/central government – if government post-Portas is paying attention – do this, or will too much business transfer to Amazon before the necessary changes are made?