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The death of mediocre retail?

September 3, 2019

We have too many stores today. We have retail space that is no longer fit for purpose. And, forgive me for putting this bluntly, but we still have too many status quo retailers that are failing to follow the customer - and paying the ultimate price for it.

But does this mean the death of retail? No, it means the death of mediocre retail. For those willing to embrace change, this is a profoundly exciting time to be a retailer. The rulebook has been torn up and today there is a sizeable opportunity for retailers to reconfigure their best assets - their stores - for the digital age. The future is fewer, more impactful stores.

But first and foremost, the overcapacity issue must be rectified.

In the UK, online retail sales have surged from 3% to 20% of the market just in the past decade. I don’t believe that digital is the death knell for physical retail - in fact it might be its very saviour - but we must acknowledge that today we have an oversupply of retail space.

Now here’s the good news:

Stores will get better at bridging the gap between physical and digital worlds. We’ll see a deceleration in online sales growth. By 2030, I believe UK e-commerce penetration will reach 35% which might seem conservative compared to other analysts’ predictions. Sure, we’re living in an age of ubiquitous connectivity and consumers are now well accustomed to shopping on their terms - but very few people shop exclusively online or exclusively instore. Consumers want to marry the best of both worlds, which is why I believe the future of retail is, in one word, blended. Equally, looking ahead to 2030, younger generations who have grown up with technology will gain financial independence but, contrary to popular belief, digital natives tend to prefer making a purchase instore. 

But the sector must evolve. I’ve said time and time again that what we are seeing today isn’t a retail apocalypse but retail Darwinism - it’s survival of the fittest, it’s a case of adapt or die. In the future, retail space must be less about retail. The store will not only be a place to purchase goods but also to eat, play, work, discover, learn and even rent products. A critical component of the store of the future is hyper-connectivity, but let’s not discount the importance of disconnectivity in this digital age. Bricks & mortar retailers should consider experiences that enable customers suffering from screen fatigue to unplug from their devices, to slow down and enjoy the moment.

Bricks and mortar retailers must distance themselves from the transactional nature of shopping online. Experiential retail, the ‘buzzword du jour’, has been positioned as the catch-all solution to the physical store’s problems. But it does have merit - e-commerce retailers have taken the touch and feel out of shopping and there is an opportunity for physical stores to focus on all the things you can’t get online. That’s discovery, inspiration, curation, human touch, community.

But you can’t do that without an engaged workforce. The industry is so focused on how stores might look in the future that we often underestimate just how drastically the role of instore staff will have to evolve. In order to be truly customer-centric, retailers must first and foremost be employee-centric. As Helen Dickinson, CEO of the British Retail Consortium, told me in a recent panel debate - the very terminology must change. ‘Sales assistant’ is no longer a relevant title if the role of the store is no longer to purely to transact. Retailers need to rethink the rules of physical retail - the new skills required for stores associates and, more broadly, how to define success in today’s ever-changing world. Traditional metrics like sales densities and like-for-like sales growth are simply no longer relevant.

In many ways, retailers are going back to the future by offering more convenient, personalised experiences. In-home services - everything from in-fridge delivery to at-home personal styling - will become a key battleground in the coming years as retailers look to transcend the transaction and build on the loyalty and trust they’ve established with customers within their four walls. Consumers are no longer tolerant of mediocre experiences, and while we’ve already talked extensively of the need for stores to become more experiential, it’s just as important that stores are frictionless (ie easy to shop) and also repositioned as mini fulfilment hubs to cater to the growing demand for same-day delivery and instore collection and returns.

There may not be many of them at the moment but winning retailers share some common traits - agility and dissatisfaction with the status quo; laser-like focus on the customer; they have a story, a purpose and stand out from the crowd (the days of being all things to all people are over); and their stores work in harmony with their e-commerce offering.

So, in summary, we must brace ourselves for more short-term pain but the industry will be stronger for having reinvented itself for the digital era.

About the author:
Natalie Berg is a Retail Analyst, Author and Founder of NBK Retail, a consultancy specialising in retail strategy and future trends. She has more than 15 years’ experience heading up research teams at world-leading analyst firms Planet Retail and Kantar. As one of the world’s Top 20 retail influencers, Natalie has produced research on a number of industry topics including the convergence of physical and digital retail, customer loyalty, private label, discount retailing and store of the future. She is a regular TV and radio commentator and her views on retail have been published in the FT, Guardian, BBC, The Times, among others. Natalie’s latest book, 'Amazon: How the World’s Most Relentless Retailer will Continue to Revolutionize Commerce' was published by Kogan Page earlier this year.

Natalie Berg will be speaking at the ICSC Retail Innovation Forum in London on 25-26 September 2019.