‘The brick, the click and making it tick’
“We demand rigidly defined areas of doubt and uncertainty!”, so said Douglas Adams in the Hitchhiker’s Guide to the Galaxy.
No one denies the uncertainty of Brexit, but some areas of focus are perhaps misplaced.
True, much is still to come but by contrast to the 2008 recession, the market is far better placed with GDP forecast to grow +6.3% by 2020 versus +0.3% between 2008-2012. Consumption is forecast to grow +6.0% versus -1.7% for the same periods.
Even in times of economic downturn, consumers still need to feed, wash and clothe themselves and so will continue to purchase items they require, less what they simply desire, meaning the convenience market, that in which NewRiver focuses on, will remain robust.
So consumers will continue spending, but where will retailers be investing?
The physical store remains the mainstay of retail with bricks and mortar dominating online spend, accounting for nearly 50% of online sales according to recent research we commissioned. Physical store spend is set to grow +10% by 2021, validating the fundamental role of the physical store in the retail mix. Even Amazon is rumoured to be opening 300-400 physical stores.
The incessant spotlight on online is therefore perhaps misplaced. Online retailers face significant profitability and operational challenges principally due to costly delivery models. Is it last mile? Or is it last mile to nowhere!?
It is widely known home delivery is loss-making for supermarkets as it is for most retailers. Moreover, in-store grocery is forecast to continue to grow by contrast to a relatively flat uptake of online grocery through to 2021 as value store-based retailers, Aldi and Lidl continue to grow market share as well as the convenience sector.
I don’t deny online has an important role to play in the retail mix, but it is important to apportion that role correctly, as one cog in the multi-channel wheel. The declining pound will force retailers to exercise disciplined prioritisation of investment into multi-channel, everything from physical store and online to range, price, logistics, merchandise, marketing and distribution.
A push for online retailers to stump up their fair share in tax has been recognised by the government, as pure-play retailers benefit from our roads and infrastructures without contributing to maintenance.
To enhance profitability and margin, rather than delivering to the customer, at great expense, multi-channel retailers need to get their customer to come to them by way of click and collect – an area that represents a significant growth opportunity. At NewRiver we are working closely with our retailers to help maximise click and collect within our portfolio of 33 shopping centres, 22 retail warehouses, 16 high street units and 350 pub estate. To achieve this requires collaboration between retailers and shopping centre owners, and that we can be certain about.
‘Wither retail?’
According to Deloitte’s latest Consumer Review, 32% of people check their smartphones within five minutes of waking up, while 68% use a smartphone while having dinner with the family.
The ubiquity of the five inch screen and its disruptive force on traditional retail models (and, seemingly, normal human interaction) is now a cliché.
Couple this with economic headwinds, it is no surprise that traditional retail has to adapt to a rapidly changing environment.
The smartphone is a powerful engine for change in retail. The pace of technological change driven by mobile commerce is staggering and looks set to accelerate towards 2020 and, in this, three key influences stand out.
The increasing roll out of biometric systems enabling payment by fingerprint or facial recognition will further progress the move towards a cashless economy, with the retail biometric market forecast to reach $1.6bn by 2020 ($625m in 2015).
Smartphone navigational functionality is predicted to move indoors, enabling retailers to direct consumers in-store accurately to their products and interact intelligently and proactively with shoppers via beacons, LED lighting, ultra-wide broadband (providing accuracy to within 5cm to 10cm) and magnetic positioning.
As the pace of change accelerates so will the pace of data with the prospect of 5G data launching in 2020. This stands to increase mobile data speeds from 600 Mbps in 2015 to upwards of 3 Gbps by 2020. For retailers this offers a new set of opportunities and challenges from increased virtual and augmented reality propositions, to live event streaming of fashion tours or concerts.
The investment required to keep up with each of these technological changes will be substantial and there is an increasing the risk that some retailers may wilt in the white heat of this fourth industrial revolution. Others will be forced to choose where they play, focusing their investment on their strengths and, potentially, withdrawing from some parts of the end to end retail process (physical shops, online channels or logistics) altogether.
Technology will undoubtedly transform retail in the years to come, but I don’t believe technology will ultimately be the biggest influence. Perhaps the most cheering news from Christmas was the recovery in sales of books and vinyl LPs, while Lego featured twice in the top 12 list of Christmas toys. This consumer nostalgia, a desire to own something physical is fighting back against the grip of the digital.
Ultimately, people are stubbornly and steadfastly human. Physical retail will continue to serve our immediate needs, provide us with a source of entertainment and a focal point for social interaction. A space in which we can be, human. The robots may be coming but people remain a long way from being digitised.
VITAL STATISTICS
This article was first published on 3 April 2017
Images: ©Mint Images/REX/Shutterstock & Shutterstock
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