The end of the high street is not nigh

UK retail appears to be facing an apocalypse, but some continue to survive and thrive.

by Stephen Jones
Last Updated: 14 Jun 2018

If we are to believe the headlines, UK retail is in complete crisis.

It’s been a well documented decline. Toys R Us and Maplin have collapsed, discounter Poundworld stands on the brink and department store House of Fraser has joined the long list of stalwarts including Carpetright, M&S and Mothercare closing stores nationwide.

The causes have been as well documented as the collapses, with the combination of rising overheads, falling consumer spending and a shift to online shopping wreaking havoc long before February's Beast from the East saw footfall diminish further.

There can be no doubt that the high street is undergoing a rather tough time, but it's not all doom and gloom. In fact, there are plenty of brands that are seemingly bucking the trend.

Primark - owned by Associated British Foods - saw its UK sales rise by 10% in the year up to September 2017, discounter B&M Stores added 47 new UK outlets and JD Sports Fashion plc has seen a 200% increase in headline profits over the last three years.

Superdrug, Poundland and ScrewFix - alongside a string of rapidly expanding independently owned chains including fashion and gift brand Oliver Bonas and clothing brand Joules - have been among other stand out performers.

But why have these brands thrived while others have declined? 

The customer is always right

‘The businesses that are doing well are the ones that are good at retailing,’ says Richard Hyman, a strategic advisor to the retail industry. It sounds obvious, but he highlights the fact that successful brands have developed tightly focused business models with their core customer at the heart of every decision.

Primark’s growth for example has been conservative and measured. Its vibrant website is non-transactional, bosses have frequently avoided expanding to the out of town retail parks - instead favouring convenient town centre sites - and products have kept close to the affordable but fashionable range that its customers know and want. 

This is something, Hyman says, that is quite opposite to the expansive, overstocked and confused House of Fraser outlets. ‘This is about really understanding who your core customer is and not sacrificing your engagement with that customer in pursuit of peripheral customers.'

The ability to create contemporary shopping experiences  is also something that has helped brands to engage an increasingly savvy UK consumer, says Nick Carroll, a senior retail analyst at Mintel, highlighting JD Sports' theatrical shopping displays as an example.

‘It's no longer a given that a customer is going to have to visit you to buy something from you, so those that do need to be rewarded for that time-investment,’ he says.

So what does the future of the high street look like?

There can be no doubt that the high street is undergoing a period of restructuring that is probably going to get worse before it gets better. But this is not necessarily a bad thing.

In better times, struggling stores papered over the cracks in their business plans. Now that retail supply has outgrown sluggish demand, those cracks have been exposed. Relying on discounting or inertia to get through just won't cut it.

While the inevitable job losses will be painful, the zombies will fall away to provide space for the more ambitious and focused brands to fill the gaps.

‘This would be a lot gloomier if there wasn't anybody who was growing,’ says Dan Simms, co-head of retail agency at Colliers International. 'But there are plenty out there who are.'

Times are tough but physical retail isn’t going anywhere. The fact that just 16% of consumer spending occurs online, according to research by Mintel, and that spending actually increased in May shows that there is still a real demand for destination retail.

Hard conditions simply reveal a timeless truth: brands that continue to adapt and deliver exactly what their customers want will continue to thrive; those that have over-expanded, lost focus on cash flow, debt or inventory and failed to engage consumers will struggle.

Image credits: Getmilitaryphotos/Shutterstock

Tags:

Find this article useful?

Get more great articles like this in your inbox every lunchtime