CONSUMER HABITS FORCE RETAILERS INTO SURVIVAL MODE
Philip Sandzer discusses the current UK retail and leisure market.
Consumers are a fickle bunch, and their spending habits highlight this. The British Retail Consortium (BRC) have announced that despite the rise in spending recorded in March (2.3%), it has subsequently decreased in April, with the year-on-year level dropping by 3.1%. The worst since the mid-1990s. Influencing factors suggested in the latest BRC data include the early timing of Easter (in March), the unseasonable cold weather and more importantly a squeeze on discretionary spending.
It seems as though we are never too far away from bad news about the high street. Last year retail administrations increased by 28% on the previous year to 118, according to Deloitte. The landscape has not shifted dramatically over the past quarter with further announcements of high-profile administrations, CVAs and restructures. Of which some of the latest casualties include Bargain Booze owners, Conviviality Retailing, through to electrical retailers, Maplin. Not surprisingly, the number of new store openings in 2017 fell by 10% on the previous year, the lowest level in seven years*. Whilst much has been made about consumers feeling the financial heat from wider economic woes, much of what we are seeing today is a change in consumer habits which are dramatically shaping the high street (and at a pace).
The digital revolution has been impacting retailers for a number of years but for some operating multi-channels is now starting to take its toll. The high costs associated with a physical store compared to online operations could be the difference between profit or loss. Yet trading solely from an online platform could mean the level of competition is multiplied and your presence is drowned out. Achieving that happy medium is quite possibly the holy grail. Department stores were once the doyen of the high street, but current warning signs from them signal that there is a greater ground-shift happening which could lead to large amounts of available space on the market.
Yet ironically the department store concept could be one solution for small and large retail spaces. Opening up properties on a flexible basis, the ability to flex up or down, be a pop-up or a mainstay, thinking outside the ‘retail box’ for both retail and leisure operators is needed in order to keep pace or even influence consumer demand and trends.
Whilst the economic outlook remains challenging for both businesses and consumers, optimism is growing. Spending on big ticket items such as holidays, sports events and gym memberships continues to grow and is sapping expenditure from elsewhere. Rethinking the physical format and its offering is vital to get people back into a store.