May 2019

Property Week 13/5/2019

Insight by Richard Scott – Nash Bond

 

It’s hard to avoid headlines decrying the death of the high street. It’s true that sales from shops are declining, but cursing the growth of online for killing the retail store is missing the point.

We need to stop talking about physical versus digital sales. Consumers don’t shop channels, they shop brands and often the way they discover and grow affinity with brands is by visiting their store.

The way we shop is changing. We might see a dress we like on social media, visit a shop to make sure it fits and then buy it on our smartphone on the way home in order to find a better price or avoid lugging a shopping bag around with us for the rest of the day.

People don’t just go to store to buy something. They use it browse, have an experience, validate their purchase or even pick up online orders. Judging a shop by the age-old metrics of sales per square foot is out-of-kilter with how we shop today.

The store has myriad roles in today’s retail world. It is a mini-distribution centre. Fulfilling online orders isn’t cheap which means the popularity of click-and-collect is a great thing for retailers. Delivering to a store rather than many individual homes brings cost savings aplenty.

Retailers are encouraging shoppers to use their store for this purpose. High street stalwart Next, for example, offers click-and-collect for free – it charges £3.99 for home delivery – to persuade shoppers to choose this option. It insists its customers prefer this method as it means they don’t have to wait around at home for hours on end.

High street

Source: Shutterstock/ Willy Barton

More than half of Next’s online orders are picked up at stores and 80% of online returns are brought to shops. Such is the importance of this function that Next boss Lord Wolfson said last month that he would be prepared to keep up to 120 loss-making shops open in the future simply to maintain its online service.

The store is also a retailer’s biggest marketing tool. People go there to discover products and truly experience a brand. That’s why we have rafts of brands from Nike to New Balance, and Smeg to Samsung fighting it out for prime retail space in London’s West End.

These businesses could sell online or rely on third parties such as Sport Direct or Curry’s PC World to drive sales. Instead they invest in their own flagship stores to showcase what their brand is about and present product in a way they think is most appealing.

Walk into NikeTown, Oxford Circus with music pumping from its in-store DJ, the beautifully presented products and inspirational images of Cristiano Ronaldo and Mo Farah emblazoned on the wall. It’s a veritable cornucopia for sports enthusiasts and only the very hardy will come away feeling unmoved by the Nike brand.

But are these stores delivering stellar sales per square foot? The honest answer is that most big brands don’t care. They know the store is driving awareness, brand love and ultimately sales – and whether that sale is with Nike or Sports Direct, where shoppers might’ve found the same trainers they’ve fallen in love with for 15 quid cheaper, is immaterial.

The store is also a showroom that can give shoppers confidence in their purchase. There’s a new breed of pureplay retailer such as Made.com or Loaf.com that are committed to opening stores.

These retailers know that shoppers want to touch, feel and sit on a sofa before they spend the best part of a thousand quid on it.

The pureplay approach to running stores is far more data-driven and they are less concerned with sales per square foot. In fact, there is no till at Made.com. Shoppers can buy online whilst at its showrooms by scanning QR codes on products with in-store iPads, but no items can be taken away from its stores. Instead they are delivered direct to the buyer’s home.

Perhaps traditional bricks-and-mortar retailers should take a leaf out of their dynamic digital rivals and move away from traditional metrics of measuring a store’s performance.

We know the shop is serving different purposes, but retailers’ inability to track and measure the true impact of these functions is contributing to the damning view of a struggling high street.