The real challenges facing the High Street!

Many column inches are written on stats from the High Street such as the recent ONS sales figures (-0.7%) and the BRC drop in footfall. The same happens when we publish vacancy rates or the number of openings and closures. It is a great sector to work in as there is always a story to be had and you can take your pick from the good, to the bad to the ugly! With all data, however, it is important to evaluate the source and how comprehensive it is. Not all are the same and so if someone says that seaside towns are dead and bases it on analysis of six seaside towns when there are many more or indeed a consumer survey of 100 people then for me it is ‘breeze data’ and not a true indication of a wider change – ‘climate/seasonal change’. It is a cumulative trend that you need to look for.

That said the issues that face retailers are many but in short we can see that inflation far outstrips wage growth, which gives us less spend. On top of this we have seen utility costs rise significantly and at the same time the Asda income tracker is also telling us that we have less money to spend. As such there should be no surprise that retail sales fell 0.7% last month and let’s be honest and not say it is the weather or pre Christmas spend cashpiling. The reality is that we have less money and we are very choosy about our needs and wants. Lidl and Aldi have done an outstanding job on addressing consumer NEEDS and the likes of Primark, Amazon, ASOS, Apple and on a personal note my local rugby team, Leicester Tigers have been very good at addressing consumer WANTS. The fact that Tesco has sold over 100,000 Hudls just shows that when we want to spend we do but we do so wisely. At the end of the day we all want to be sold to and this is an art and, one which many retailers have forgotten how to do and are now desperately spending money to change. Changing consumer perceptions is not easy and so those retailers who strive to keep and grow their existing customers and are not so mass market focused, do well. John Lewis is probably the best quoted example in this respect.

In my view the challenge for retailers is not just all of the above but it is to deliver the shopping channels when and where the consumer wants them. If this order by 10pm for next day delivery (Next),  timed delivery slots, click and collect (free) or just come and visit us in-store then that is what needs to be optimized. How many retailers incentivize their customers to visit their stores so they get the opportunity to wow them and get them to become active customers? Very few if any is the answer. The technology and ability is there and we will shortly show this in principle with pour partnership with Addictive Points on our consumer shop search site www.localdatasearch.com. Research today from Nottingham showed that women visit eight shops and then buy from two – make sure you are one of the two! Consumers, and I am no exception, want to visit a shop for an experience, the ability to see and try, and finally to be advised, engaged and made to feel that the time spent in that shop was worthwhile, fun and answering my needs and wants. We might not buy today in-store but many go home and then order online as a result so show-rooming is something to be encouraged, supported and loved as people are coming to your shop. Make sure you convert them to customers and preferably evangelist of their experience with you.

Not rocket science but often forgotten! One thing we need to avoid in 2014 or indeed 2015 is a rise in interest rates.

One thought on “The real challenges facing the High Street!

  1. Hi Mathew
    Your comments as usual both apposite and interesting. Retail spending as you rightly say is being hit by the lack of disposable income on an individual basis both by the economic situation and by the indebtedness caused by previous overspending. There are also long term issues at play in terms of the end of the baby boom, the aging profile of the population and the fact that, whilst most family incomes are increasing mainly as a result of a second earner in the family, cost are far outstripping the rise as a result of the needs for childcare, education fees etc. The middle is being squeezed and that squeeze is going to continue long after the current short term economic pressures ease. Doug Stephens in his book “The Retail Revival: Reimagining Business in the New Age of Consumerism” demonstrates clearly how this is happening in the USA.
    At the same time I have yet to come across a local authority shopping needs analysis that doesn’t come to the conclusion that the particular district that they are looking at has a gap in the supply of retail provision that requires extra capacity to fill it. This at a time when it is patently obvious that we have more than enough shops in total though their distribution may be an issue. The parameters used in these reports need to be more closely examined especially since the reports are used by local authorities with no background in the basis of the calculations and therefore with difficulty in evaluating their appropriateness
    Another serious issue is the problem of business rates. Whilst the campaign to tweak the rates by bringing forward the revaluation and freezing the rate in the pound could provide some short term palliative treatment it is a root and branch reform that is needed. It is patently obvious that retail bears a disproportionate share of the total (as you would expect to be the case with any property tax that is rental based) but even within the retail sector itself the anomalies, biases and shear ineptitude of the VOA in establishing valuations is quite overwhelming. The major discrepancies between outlets is crazy and can totally bias retail results. As part of looking at the local retail scene for West Oxfordshire I have just completed an analysis of the rateable values of all of the retail outlets in the town of Witney and some of the variances. For instance (all the figures relate only to the designated retail space of the store and where an average is applied by the VOA I have proportioned the figure based on estimated selling/other space splits): –
    The M&S food outlet within the store in the town centre has an average rateable value of £85 per square metre whilst the Waitrose supermarket has one of £425 both being in prime sites.
    If the basis of the calculation of the rateable value of the New Look store were on the same basis as the Debenhams next door and of similar size and configuration its rates bill would be £20,000 per annum less
    There is a Cafe Nero 50 metres from a Costa Coffee on opposite sides of the road where you have to walk past both to get from the older shopping in town to the new development. Costa has a rateble value per square metre of £147 whilst Nero’s is £270.
    I could go on with many more examples of what can give the impression of almost arbitrary evaluations and that will continue to be the problem with a property tax. The sooner it is thrown out and replaced with a tax that is based on ability to pay then the better in leveling the playing field between all types of retailing whatever the business model. Increasing corporation tax would involve no extra cost and be easy to administrate. The major cost saving at the VOA and in local authorities collecting the tax could be used to finance a proper tax avoidance regime which could close some other loopholes. It would also encourage new start ups and the development (or survival) of more of our independents
    I will be very interested in the local political response but more would like the national politicians to look at the facts in the same way as your empty shops facts have caused some re-thinking.

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