Omni-channel retail has been a fashionable retail trend for many years as traditional brick and mortar first retailers try to determine how to effectively integrate online channels into stores. Some are doing this very well with businesses like John Lewis offering click and collect quickly and efficiently across their Waitrose and John Lewis stores giving the effective range extension for each brand. But, for others that integration has been more difficult to complete with, and has felt like two entirely separate tracks. However, the circumstances of COVID-19 has forced people's hands where for much of the last year, online was the only way people could shop and that made having a viable offer a necessity for most retailers.
As we move deeper into 2021, we have seen COVID-19 accelerate the need for digital growth. Unsurprising statistics from card handlers show a 20%+ growth in online sales and that trend is expected to continue, though there are those who expect a rightsizing back to the more traditional 10% range. One only has to look at the activity of those who are clicks first and see that they are among the most acquisitive on the high street with online retailers such as Boohoo and ASOS acquiring some of the Arcadia brands and Boohoo also acquiring Debenhams, Karen Millen and Coast over the last year. A number of bricks and mortar retailers were also in the mix for those brands, but the growth of online as a sector rather than a channel looks set to continue. But, what does this mean for our approach to shopping and does this now mean that retail in the UK has truly become digital first, or is this just a temporary blip borne out of the necessity of COVID? And, does it mean that there are other potential acquisition opportunities on the highstreet?
Becoming digital first requires customer adoption and a robust supply chain
Back in its 2018 annual report, M&S announced it was becoming a digital first retailer. While it has made strides and 2020 was described as its most digital Christmas yet, the general store experience does not evoke digital first. Having said that, this requires substantial investment and is not something that can, COVID-19 aside, happen overnight, not least it requires customers to adopt it. This is the sort of project that many of our clients have been embarking on in order to reflect the opportunities and wider range that can be drawn upon from the wider logistics network. Some of this is basics, things like effective stock control to be able to get single units of certain items to locations quickly – whether store or a customer's home, other parts can be more innovative as people determine new ways to sell the products and help people choose. Not many would have expected video chats with sales staff to be a thing, but many retailers are putting that in place in order to enable customers to benefit from that human touch and the knowledge of staff in a more personal way. These innovations, the use of clever camera tech to augment reality so you can see yourself in clothing or that furniture in your home, help take these things forward and help customers make the right choice for them.
With some limited exceptions, such as for bespoke or unusual products, our shopping habits more than ever are now born out of either convenience or experience. If retailers are not able to deliver on one or the other then life is increasingly tough. As delivery times have become ever more competitive and same day or next day delivery or at worst click and collect is available for many brands, online gives a level of convenience that is hard to beat. Particularly when combined with generous returns policies and ease of returns that pervade much of the fashion sector, it is not surprising that businesses like ASOS and Boohoo have been able to accelerate their models so quickly. This is also true of luxury brands who through strong 3PL partnerships are able to ensure that goods reach us quickly and we have 30 days to think about and return in the original box at a wide range of locations. This removes the risk and fear that many have from buying online, particularly for high value items, as they have seen that they can return and get money back as easily as if they bought in store. With our clients we have seen that to make this work requires a review of the supply chain, both forward and reverse to ensure that the right agreements and logistics are in place with the right KPI/service levels to deliver the necessary standards.
What does this mean for physical stores?
This also leads to a natural review of the physical estate, both to make it work but also to reflect the geographical realities of 2021 retail. With many of us not going into offices for a year and 2021 office attendance looking unlikely in the medium term if it returns at all, it is likely that office district retail is also going to have to adjust. Those stores that were profitable with thousands of office workers nearby will likely have a fraction of the shoppers in the future and may no longer be required. This does not just apply to those districts but also extends to the high cost, but highly trafficked commuter routes, are they still worth the investment in the way that they once were? The latest ORR statistics show that rail journeys have increased from this time last year, but in the last quarter of data available (taking us to September) there were just 29% of the journeys being taken compared to the same quarter the year before. While that is not surprising given lockdowns, and the number is up from the low of 7% in the quarter before, the question is will it ever rebound to levels to justify the rental premium?
All of which means that clients are looking at their space, reshaping and looking for space in different areas to invest in than traditionally may have been in the case. We are seeing smaller stores and businesses considering more suburban areas and how to repurpose stores to add value on click and collect. It is very likely that we will also see a rebirth of the concession or store within a store model as people get more creative with space and look to drive complementary reasons for people to be in store.
And the retail workforce?
All of this requires the right people. While there have been headlines showing well over 100,000 job losses in the sector in 2020, there are also jobs being created in different areas. As we start to shop differently we will perhaps need staff with different skills and expertise to support that. Clearly digital skills will be highly sought after but other skills and particularly those in the supply chain and logistics arena will be key to ensuring that the business runs effectively. Seldom will these be high profile roles or front of customers minds, but when these vital services stop working and products are out of stock or take too long to arrive then they are things that cause customers to switch brands.
We have been hearing about the death knell for the high street for some time. Many blame this on online and the rates differences that generate an advantage for pure play as the smaller estate attracts smaller property taxes such as rates and 2021 is seeing louder calls for this to be rebalanced. But, in practice it is far more complex than this. The high-street has been struggling, but that is perhaps considering things through the wrong lens, maybe rather than struggling it is evolving. It is developing into a new form of retail that suits our new lifestyles. There is a place for local stores and local products, particularly when lockdown restricts travel. There is a place for experience. There is a place for multi-use occupation with hospitality and leisure. There is a place for the physical to augment the reality. The secret sauce is in how these factors all combine together to create a community and that appears to be a journey that we are just embarking upon.
If you have a specific question around your supply chain or require expert advice, please get in touch with Dominic Watkins, Head of Retail, Food & Hospitality Sector.
