Why Retail is important
- Retail sales are a major indicator of consumer spending trends because they account for nearly one-half of total consumer spending and approximately one-third of total economic activity (source Bureau of the Census, U.S. Department of Commerce)
- Retail accounts for 1 in every 8 job
- It is the largest private sector employer and employs around 2.9 million people or 1 in 10 UK (source Sector Skills Council)
The State of Retail
Retail is changing and if you walk through most cities and towns you can’t help but notice the number of empty shops. Much of the big changes hit the news headlines:
- Clinton cards closes 300 shops and 3000 job are lost
- Mothercare to close 111 stores by 2015
- Game closes 277 stores after being saved from administration
- Julian Graves stores close after going into administration
The Trends In Retail
For a complete 360 degree look at the potential for retail futures here is an awesome set of slides from PSFK.
Despite this promising future of opportunities the current situation is bleak. The proportion of shops in Britain lying empty has hit a new record of 14.6% in February, 14.6% of retail shops lie empty: around 24000 shops. The change in retail is not just about closures it is also the type of shops that are taking the place of the more traditional retailer.
We are moving to services in many cases rather than products e.g. the highest sector in independent retail growth is Beauty salons and Nailbars which increased by 16.5% according to Local Data Company.
We know that many of these trends have been driven by the internet:
- more than half (54%) of shoppers say they shop online up to five times a month, up from 43% five years ago. source: MyHigh.st
- A recent report from Deloitte estimates that up some multiple retailers will shrink by 40% due to online sales. source: Deloitte
- The Mary Portas review (pdf) likewise points to retailers not adapting to changes in shopping patterns as well as lack of vision and support by local authorities
First of all it is no secret that we have been moving to a digital era and online sales have been growing. But that is not the whole picture. People are much more price savvy and use the internet to research and compare prices online.
The recession has accelerated how consumers use online to help their spend go further. This increase in price sensitive customers, lack of innovation and a loss of focus on adding value, has simply caught many retailers asleep. They were not in tune with changes in consumer buying behaviors which ultimately led them to either downsize to remain profitable or worse close: e.g. HMV: - the move to digital, pirating and new models of listening to music like Spotify. Even Apple now are moving into the web based radio business.
As digital technology accelerates the next retail casuality is likely to be book stores as books move to digital.
3 Ways Retailers Can Fight Back
1. Blend Channels
Google recent multi screen report (pdf) highlights that as much as 65% of shopping starts on smartphones.
Online sales now account for about 12% of all retail sales.
The multi-channel shopper is though is worth 130% of a single channel shopper; experts at businesses source: K3 Retail.
A strong online presence can stimulate interest in a retail brand and help promote the brand to new customers. It isn’t always about price unless you let it be. Many of the reports listed here highlight the need for retailers to create experiences not just stack boxes and sell them.
2. Build Customer Relationships
Last year I remember reviewing the British Independent Retail Association (BIRA) and British Retail Consortium (BRC) to see how they were leading the sector in the use of social media. Sadly they were not. I think that retail has huge opportunities to lead and build community around itself locally using social media.
Few if any retailers I know of locally have been smart in using email for newsletters, updates and specials to customers. Most simply see a customer walk in and then out without thinking more broadly about how to develop a relationship with their customers.
3. Add Value
I have worked in retail and know the need to focus on merchandising. But in todays world you can also add value to customers through information, tips and more. If you look at shops in the US selling cup cakes they also put online their recipes; it doesn’t stop people coming in to try the cakes.
Two recent interesting projects are taking the trends and trying to create virtual high streets. Looking at the reports listed here people still are keen to support local and want to enjoy the time out. My view is that whilst these are good projects it may be 2 or more years out before they gain any traction. Have a look for your self:
Let me know what you think