Adapting to the Changing Retail Landscape. Revitalizing the UK High Street

Dossier / Travail , 2021 , 9 Pages , Note: 1,0

Gestion d'entreprise - Commerce et Distribution

The report discusses the challenges faced by the high street retailing business model in the UK, which have been exacerbated by the global recession. These challenges are due to changing customer behavior, the emergence of retail malls, and the growth of internet shopping. However, there are also promising growth opportunities for high-street retail due to changing customer needs and behavior. The report recommends that high-street retailers adapt to the new retail landscape by incorporating technology and building it into all customer touchpoints. This will enable both e-commerce and high street sales channels to complement each other, while the high street provides a unique and tailored customer experience that cannot be replicated online.

1. Introduction

This report looks at whether high street retailing is still a viable business model. The high street in the UK is currently facing enormous challenges, which have been exacerbated by the global recession. However, ratherthan being cyclical or pandemic, the reasons are systemic. The reason for this is that customers have begun to shop in a new way. Traditional city centres and major streets have been unable to adapt to developments such as the emergence of retail malls, the quick growth of internet shopping, and changing customer behaviour. Nevertheless, there are also promising growth opportunities for high-street retail, precisely due to the changing customer needs as well as shopping, to life behavior. At the end of the report, recommendations are given on how brands, as well as legislation, can revitalize the English high street.

2. Definition

In the following the terms “high street” and “retail” will be defined to best answer the research question “is high-street retail still a viable business model?”.

2.1 High Street

Even though there are generally agreed definitions of the high street coming from a variety of sources, there is not a standard definition of “the” high street (GENECON LLP and Partners, 2011) (Cambridge Dictionary, 2022). The Economic & Social Research Council has hence defined the high street as following: the high street is regarded as a shopping centre that caters to the requirements of the local population. It also includes services such as leisure and cultural amenities, as well as public and private services. It's also close to workplaces and other non-retail enterprises, and it's reachable by a variety of modes of transportation (Wrigley & Lambiri, 2015).

2.2 Retail

Retail, often known as Point of Sale (PoS), is a commercial setting in which items are sold and customers and goods are brought together. Usually, the sale, purchase or exchange takes place here. The PoS can be found both in a brick-and-mortar business and in online retail (Dr. Thomas, 2020).

3. Types and allocation of high-street retail in the UK

Various kinds of retail stores appeal to different types of customers and use various sales strategies. The general understanding of high-street retail types includes department stores, speciality stores, supermarkets, convenience stores, discount stores, hypermarkets or superstores, warehouse-stores, Dollar stores and drug stores, mostly accompanied with an e­commerce shop (quantzig, 2021). When looking at the type of distributed products within the prior mentioned high-street retail stores in the UK (see figure 1), fashion retail accounts in nearly one in three businesses (30.3%), while travel agents make up the smallest part with 3% (together, 2019). This paper howeverwill focus on high street retail.

According to Deloitte research most consumers who are going to the high street for something other than shopping, enjoy leisure and social activities such as visiting cafés (52%), eating (45%), or going out (43%) (Deloitte, 2013). The research not only illustrates the intricacy of the different functions served by the high street, but it also emphasises how intertwined the prosperity of the high street is with broader social and economic activity.

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Figure 1: Leading businesses in high streets in the United Kingdom in 2019 (own representation aftertogether, 2019)

4 Current challenges for traditional high-street retail:

In the United Kingdom concerns regarding the high-street degenerating are omnipresent, with the high streets facing a number of critical circumstances. These concerns have become more pronounced by digital technology adoption and hence the rise in e-commerce, shop¬closures, falling footfall and tax regimes- to list the most important factors, with the pandemic acting as accelerator. There are more challenges that speak against the success of high street retail than for it. Conversely, as brick-and-mortar establishments are one among many consumer touchpoints, the retail value chain is growing more complicated. These aforementioned factors and how they impact the deterioration of the UK high streets are analysed within the next subchapters.

4.1 Shop closings due to Covid-19

Due to the Covid-19 pandemic and thus the transition to internet shopping continued to weaken demand for bricks-and-mortar shopping, over 8,700 British chain stores closed within the second quarter of 2021 (see figure 2). The amount of retail chain store closures greatly surpassed the number of new store openings, while clothing stores have been most severely impacted (The Local Data Company, 2021).

Even before the lockdown, shops were already faced with a surge of high-street chain closures, however the pandemic expedited the downturn. The 6,000 net closures in 2021 were less than the 11,100 retail closures in 2020, when the UK enacted countrywide lockdowns for the first time. With 3,500 new shops opening in 2021, the number of new store openings was at its bottom level since at least 2016, when the Local Data Company first conducted the same research (Jolly, 2021). In all regions, the type of location continues to play the biggest role, as seen in figure 3. By far the most stores were closed in high streets (3,643), followed by shopping centres (1,464), while retail parks had the lowest closure rate (634). Consumers who buy locally and are less willing or able to go to city centres and will thus regard shopping malls and high streets as less convenient (The Local Data Company, 2021). Fashion retailers and chain restaurants, which were among the most hit by shutdown last too more likely to be found here.

4.2 Footfall

Despite complete reopenings and relaxation of restrictions, high streets and commercial malls footfall are still 40% lower than before Covid-19 (see figure 4) (British Retail Consortium, 2021). “This drop off in footfall has affected those multiple retailers located on high streets, particularly those in large city centres” (pwc, 2021).

4.3 Rise in e-commerce

Digitization has revolutionized the interaction between the market and the consumer- even before the pandemic. Covid-19, in the context of store closures and curfews, has ultimately only acted as a lever for everyday digital consumer life, e.g., the use of e­commerce, social media and other platforms. Therefore, in-store retail sales declined, and e­commerce grew. E-commerce accounted for over 35% of total retail sales in the UK by the end of 2021 (see figure 5), while the number of e-commerce newcomers climbed by 32% in 2020 compared to 2019 (Signifyd, 2021). According to the most recent research from Accenture, there would be a massive surge of 169 percent in ecommerce transactions from new or low frequency users following the epidemic (Accenture, 2020).

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Figure 2: Multiple retailer openings and closures (own representation after The Local Data Company, 2021)

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Figure 3: Multiple retailer net closures by location type (own representation after The Local Data Company, 2021)

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Figure 4: Footfall change on the high streetfrom start of2020 to July 2021 (own representation after British Retail Consortium, 2021)

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Figure 5: Online share ofretail sales in the UK (own representation after Retail Research, 2021)

73% of UK consumers felt inspired by COVID-19 to try new shopping options that they are likely to use in the future, such as expanding shopping channels that save them a trip to brick- and-mortar stores. Among them, as many as 25% said they had not shopped in stores at all during the 2020 holiday shopping season (Signifyd, 2021). This evidently presents a significant threat to the classic retail on the high street.

Additionally, according to the McKinsey study What got us here won’t get us there, online marketplaces generated 65% of the growth ofthe top 150 retailers worldwide during Corona (McKinsey & Company, 2020). The grocery segment in particular, has experienced another strong increase. Whereby the growth of Amazon UK recorded the strongest sales market for online groceries in Europe and increased up to 120% depending on the category (Styrk, 2021).

Quick commerce in the context of grocery shopping, where the focus is on immediate satisfaction of customer needs, should also be briefly considered in this sense. Today, convenience and home delivery with the value proposition uncomplicated, fast and short delivery time, has become the norm. This is also a trend in the retail sector and is competing with stationary retail because consumers have become accustomed to the business model, the speed and convenience it offers- especially through lockdown (see chapter Omnichannel - digitalpoweroftechnologyin-stores) (Schu, 2021).

4.4 tax regimes

Another challenge facing brick-and-mortar retailers is corporate taxation. This is due to the fact that the high costs borne by traditional high street stores are incomparably greater than those of e-commerce provider. Business taxes especially, are inextricably linked to real estate prices, meaning that high-street retailers are hit twice: once by rents, then by business taxes (Thomas, 2021).

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However, traditional retailers, might benefit from government assistance without compromising their free market instincts by altering corporate taxes to match the changing economic landscape of e-commerce - and other industry stalwarts. Thus, corporate tax reform and the implementation of an internet sales tax have been considered for some time and are presented as potential forthe high street in chapter reform ofthe corporate tax system and the introduction of an online sales tax (Thomas, 2021).

5. Growth opportunities for high-street retail:

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Figure 6: Annual rental cost ofprime high street reail rents in the UK in the 2nd quarter 2021, by city (in GBP per square feet) (own representation after UK Retail Marketbeat, 2021)

Nevertheless, a number of opportunities speak for the revitalisation of the high street, especially the changing consumer behaviour and the resulting urbanisation, as well as the sensitisation for omnichannel. In addition, the upcoming legislation lays the foundation for a more balanced cost distribution of brick-and-mortar shops and online retail.

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• Université: Hult International Business School
• Note: 1,0
• Année de publication: 2021
• Pages: 9
• N° de catalogue: V1348597
• ISBN (PDF): 9783346863904
• Langue: anglais
• mots-clé: adapting, changing, retail, landscape, revitalizing, high, street