What are the implications for retailers and other businesses?
The genie is out of the bottle for a lot of consumers already but especially for millenials and younger shoppers who have grown up with the internet and will become more than half of the UK’s adult population. Already one in ten people of all ages interviewed for the research said they planned to do even more shopping online in the next 12 months.
Richard Lim of Retail Economics, said: “Successful retailers have always had to reinvent themselves to stay relevant. However, the pace of change will inevitably prove too fast for many. It definitely feels like the digital retail revolution is only just getting started.”
The report suggests that new and emerging technologies like AI could enable the automation of delivery and personalised marketing will drive future online growth too.
The findings will alarm existing high street retailers and landlords who are still reeling from several high-profile insolvencies in a trend that shows no signs of stopping.
Retailers such as Next are a useful case study in how a traditional retailer can be a success online. Last year their internet sales were already 53% of their total volume which is a vindication for their strategy of early adoption via their Directory catalogue.
The other important strategy they have pursued looks even more astute – only signing short-term leases for their physical stores.
Lord Wolfson, Next’s Chief Executive, outlined the situation to shareholders in their 2019 annual report. He said: “We don’t have too much space – we have too much rent, rates and service charges.”
He also predicted that shop space will become much less expensive in the coming years which will terrify landlords already coming to terms with retailers such as Debenhams, Arcadia and Bathstore increasingly using Company Voluntary Arrangements (CVAs) to reduce outgoings and close unprofitable locations. In addition administrations such as Toys R Us, Maplin and Office Outlet are leaving extremely large units now standing vacant.
Lim identifies a generational shift in consumer behaviour as being a key factor in the move to virtual window shopping. He said: “The industry is undergoing a painful readjustment period. The acceleration of further store closures will eventually lead to a more inconvenient experience for some groups of consumers across many parts of the UK.
“Inevitably, this frustration will be a catalyst for further online shopping with consumers turning to online as an alternative to in-store purchases.”
This will create a self-fulfilling feedback loop as more people aged 25 to 44 are already far more likely to buy clothing, books, gadgets and food online than over 55s already according to the research.
If, on their rare trips to a high street, they can’t find what they’re looking for then they’ll have even more cause to get their devices out and buy online while having a coffee, vaping or doing what they’re actually able to do, in the very place where they used to shop.
What isn’t ironic is doing nothing if your business is in a tailspin. Contact one of our expert advisers as soon as you can and we can set up a free initial consultation to decide what we can realistically do to help you.
Sometimes a company can be saved, potentially through the CVA route or administration and sometimes it can’t and has to be closed as orderly as possible, often through the company liquidation mechanism, but letting it fail without trying is the worst of all worlds.