The future of the high street
With a spate of retailers being bought by their ecommerce rivals amid calls for a new digital sales tax, Kinase co-founder Richard Brooks asks what the future holds for the high street.
In early February Boohoo bought Dorothy Perkins, Wallis and Burton, completing the break-up of Arcadia after ASOS acquired Topshop, Topman and Miss Selfridge, with Boohoo also taking Debenhams. Crucially, it was only the online aspects of these businesses that they were interested in, meaning another wave of store closures and redundancies.
Covid lockdowns have accelerated the move to digital by 5 years or more, accelerating a trend that was already growing. In 2019, high profile casualties included Mothercare, Bonmarché, Clintons, Links of London and Karen Millen.
The causes have been much discussed elsewhere, but leading themes include:
The appeal of online shopping – convenience, choice, price and personalisation all stemming from an ability to innovate rapidly.
A structural in-balance in costs – high street shops pay business rates, whereas some online rivals are able to avoid UK taxes almost entirely: unfair advantages in price competitiveness quickly emerge.
Low margins mean that only a small shift in sales to online rivals is required to tip a business into unprofitability.
In this context, a digital sales tax could be seen as a necessary rebalancing of the costs businesses face rather than a simple tax raid.
Of course while some retailers falter, others have thrived by adapting to a multichannel model that embraces both web and store. Kinase has always championed the effectiveness and measurability of digital marketing, but remained channel agnostic when it comes to fulfilment, finding that more choice leads to better conversion rates.
Customer journeys are not fixed in time as static maps. They can contain many points across digital and physical locations. The best experiences offer a choice of routes to fulfillment. It is noticeable that while Links and Bensons have fallen into administration, Kinase partners such as Goldsmiths and Dreams have invested in understanding the customer journey from digital marketing to physical store sales and are performing much better.
An interesting side effect of increasing ecommerce is that it affects what people buy. Web shoppers will opt for brighter colours and less tailored fits. Physical shoppers care more about fabric which might further influence price sensitivity and the lack of a fitting room increases the return rate; it is no coincidence that retail has accelerated the cycle of ultrafast fashion.
Looking ahead to the end of lockdown, at least some online shoppers will return. So what sort of high street do shoppers and the nation in general desire? Should it be left to the market to decide, or does it play such an important role at the heart of our towns and cities that government intervention is justified?
Based on existing trends and experiences which customers respond to, the following questions and possible futures will all need to be addressed.
Showrooming For Brands
Shoppers clearly value physical stores, but aren’t always willing to pay for it. Witness the rise of ‘showrooming’ where people visit a shop but then use their mobile to find the cheapest price online. Savvy brand owners can afford to subsidise a showroom, but multi-brand retailers face an uphill battle.
Social
Shopping has always been partially a leisure activity that is hard to fully replicate online, and we will see a surge in the need to socialise after covid. The high street must be a pleasant place to visit and incorporate a mix of social and experiential activities.
Community
Can the transposed retail sales be replaced with other things that communities desire and require? Should free spaces exist for local groups alongside libraries and doctors. Is there a social good requirement to maintain local branches of services like banks even though they are rarely used and unprofitable? If we consider a bustling high street to be desirable but unprofitable, what is the model for subsidising it?
Central Business Districts
Or is the very idea of a Central Business District obsolete? With the rise of home working, will populations spread out once more? Even Doctors and libraries are going digital. Maybe landowners need to accept that their high street assets just aren’t worth that much anymore and sell them off at a loss for housing, with an Amazon delivery locker on every corner. A recent plan for Stockton-on-Tees suggests replacing the High Street with a giant park, creating a new kind of town centre. Bill Grimsey, former chief executive of Iceland commented: “Stockton is probably the best example in the UK of a town that’s recognised that shops are not going to be the mainstay of town-centre survival in the 21st century and we need to do something radical about it.”
Buy Local
The old high street was often a depressing mix of run down shops and homogenized chains. Can shoppers be persuaded to pay for what they value and support interesting local shops? Digital campaigns at a local level can also fit into a renewed high street - helping people stay in touch with the cafes, shops and services available.
Shifts like this are hard to see coming to fruition while online enjoys quite so many advantages to keep costs down. The focus here is on giant online players like Amazon with poor worker conditions, altough there are moves for unionisation for the first time. Online players forced to pay a fair share of taxes, and for other externalised costs, could move the current ‘online vs high street’ dynamic on to something better for everyone. Better pay at every stage of the supply chain while ending the scandal of working poverty would be good not just for the high street, but for the UK as a whole.
An integration of online and offline locations, advertising and infrastructure will push forward from the current framework of debate centred on ‘the high street failing’ and ‘online giants who don’t pay tax’ for the good of all.
