I’ve done a lot of radio interviews in the past 10 days talking about the fact all these heavy discounts and early sales are doing no good to the big retailers, how there will be carnage in the New Year. It doesn’t matter if we hear “sales are up year on year” or “footfall is up year on year” if profits mean there is inadequate surplus in the bank to pay the quarterly rent bills. I’ve predicted closures & administrations. I am a joy to be around this festive season!!! BUT… I think this is evolution of the sector, of the industry and of the high street – here’s why.
The role of high street retail has changed; this is natural selection & evolution in action
Recent reports from the Telegraph indicate that as many as 40,000 jobs are at risk in the retail sector with a list of retailers entering or facing administration. These include:
- D2 Jeans
- La Senza
- Blacks Leisure
- Hawkins Bazaar
- Barratts Priceless Shoes
- Past Times
Significant numbers of store closures were announced during 2011 by HMV, Mothercare and Thornton’s to name a few and others including Marks & Spencers, Ocado and Tesco may see analysts reducing their profit forecasts as a direct result of heavy and sustained discounting in the run up to Christmas.
I am not overly surprised. Sad, yes. Surprised, no. It’s clear that in this new online, smart-phone-enabled, mobile-internet-accessing, socially-connected world the role of retail, retailers and the high street has shifted, profoundly. What’s happening now is clearly awful for all those affected BUT it is a case of “out with the old and in with the new”. Consumers have voted with their feet and are telling us what they want from retailers (and in this I include the wider remit of leisure / hospitality and services such as restaurants, bars, cafes, hairdressers and salons).
This shake-up of retailing is happening fast and has major repercussions on the whole of the UK economy but it is a necessary evolutionary process to shift from a society that was built pre-internet (bearing in mind the first transactional websites are less than 18 years old right now) to the new society, built with the internet as part of the very fabric of our existence.
Like the major climate change that brought dinosaurs to extinction, paving the way for the dominance of different species, the internet has effectively been the major climate change that has meant businesses not poised to adapt to the new world have too become extinct, paving the way for businesses that are ready to embrace this new world and grow to achieve dominance in the new climate.
What has the internet enabled that has lead to this phenomenal and rapid change?
Here is just a sample list of the things that consumers can do now that they could never have done 15-20 years ago; all enabled by the internet, all changing the retail climate:
- Review product catalogues online – no need to visit a store / show room, no need to speak to a sales assistant, no need to flick through a printed catalogue to decide what the perfect product is
- Purchase items online – no need to leave the home, no barriers of opening hours, no call centre to speak to, no order forms to complete
- Compare prices – no walking from shop to shop, no phoning around
- Find voucher discounts – deals at your fingertips
- Read product review pages – no need to trust the corporate marketing blurb or the salesperson’s patter – everything you needed to know about a product from an independent 3rd party, someone “just like you”
- Speak to past customers – social media makes it possible to not only read past reviews but chat to past customers about their experiences of products and service levels
- Check prices at other stores whilst in a store looking at an item – yes, thanks to mobile phones we can now compare prices from anywhere, in fact we can do ALL of the above any time, any place, any where…
With such power to the consumer comes a change in behaviour. It’s clear that items that they know, trust and understand can be more conveniently purchased (or reserved) online for delivery or collection from a suitable location. It’s clear that peer group review carries more credibility than a business’ own marketing messages. It’s clear that honest, openness and transparency WILL be achieved, like it or not, so business may as well embrace it!
What can smaller, independent retailers DO in the face of what seems to be a society who really only want to transact online with the lowest cost provider?
First of all retailers need to be mindful that whilst consumers CAN do all of those things online it doesn’t mean that their final decision to purchase is based entirely on price. Many of the recent success stories prove that in fact price is mainly only relevant to “boring basic” purchases – commodities, things that are the same no matter who you buy from. More personal purchases, from food to fashion, furniture to footwear, can, and do, win on service.
Now, smaller retailers CAN NOT afford not to be highly visible online – a transactional website doesn’t cost much these days and is almost as important as a cash register was 20 years ago. It’s also important to have a presence on social media too.
Most importantly smaller retailers need to engage their customer base, to understand who their customers are, what they want (products, prices and promotions, channels & locations) and to provide for those wants. Building a loyal, engaged customer base is the key to generating positive peer group review on social networks and review sites. The retailers who are failing have not kept a constant focus on their key ingredients to success, they’ve not been aware of what their customers want and how they want it, they’ve not differentiated their offering or engaged their audience, and so they’ve lost out.
Every cloud has a silver lining – what opportunities are now open for your business into 2012 and beyond?
When you KNOW your customer, where and how they shop, what they want to buy etc you can begin to identify where you need to open stores. With vacancy rates increasing and landlord’s rightly worried, there IS an opportunity for smaller retailers to secure prime property for respectable rates AND to challenge the old terms. Imagine the landlord whose retail occupant has gone into administration – they now need to pay the rates and maintain an empty building. If you have a strong proposition you are in a great position to negotiate market-rate rent reviews (as opposed to upward only), monthly rent payments (as opposed to quarterly) – things that until now have not been “Industry standard”. In the face of adversity and with evidence of a very different set of norms emerging, there is no reason why a smaller business can’t push back and set a better, fairer and more appropriate standard.
This is just one example of how to fill the void left behind as major players disappear from the high street – I am sure there will be more that are specifically relevant to your business.
Finally, how can we rebuild the habit of shopping on the high street with time-poor consumers?
For this I’d suggest Independent Retailer Month is an opportunity – July each year is dedicated to encouraging consumers to shop local. Now more than ever this campaign is relevant to ANY business based on the high streets or in local community retail centres. By creating excitement, a compelling reason to visit the local centre, retailers can work together with local councils, business support groups, local press etc to draw more people back to their location. By making a trip to the shops enjoyable, rewarding, social and fun we have the chance to remind consumers that for some (if not all) of their weekly shopping the high street can play a role. We know they need speed, convenience and the benefits of out of town / internet shopping BUT we can show them that shopping in their local community can supplement their standard shop and be an enjoyable occasion too!
Furthermore, if by demonstrating excellent service, unique products and an utterly relevant shopping experience local centres can retain the increased footfall from events throughout Independent Retailer Month in July then new consumer habits will form over time and breathe new life into a more relevant, evolved high street.
So here’s to 2012. In the face of much doom and gloom likely to fill the press in the next few weeks please don’t get dragged down. Look to the future, think like YOUR ideal customer and make sure that your business is one of those that can adapt to the climate change, surviving natural selection, evolving, and emerging successful.