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Could online save the high street?

Barely a day goes by without fresh news of the latest high street troubles. While there is a perception that this is partly due to a wider retail slow down, the fact is (according to the ONS) that we are spending more than ever on retail as a whole. The problem high street retailers face is not so much about how much we spend, but where we spend it - and the reality is that we are spending a growing proportion online.

Currently online sales account for one-fifth of total retail sales and all the evidence suggests the proportion will grow further. But with a growing appetite among shoppers for experiences and a number of online retailers exploring physical spaces, could there be light at the end of the tunnel for high streets?

While online retail is convenient, and is becoming more convenient as delivery times shorten, it struggles to deliver the level of experience stores can. Some 85% of shoppers tell us that online can never create the experience of physical shops. What’s more, shopper demand for experiences is growing rapidly. In a recent piece of Savvy research, we found that 63% of shoppers said that experiences are more important to them now than a couple of years ago. Of more interest perhaps is that 64% said experiences are more important to them than products – rising to 73% for 18-34 year olds.

It’s perhaps not surprising therefore that a number of online retailers are exploring physical spaces, from pop-up shops to more permanent stores.

Earlier in June we saw the arrival of Clicks and Mortar in Manchester, a joint initiative between Amazon, Direct Line for Business and Square – a mobile payment business, with plans for 10 shops aiming to provide physical spaces for online-only retailers to showcase products. Sellers will change every two weeks, to keep shoppers engaged with constant variety. Sounds exciting? Yes, but sadly in reality (during a recent store visit), we found the execution lacking and experience lacklustre.

There was little interaction or use of digital technology and, while there were some good products on show, I did not feel the need to revisit in a hurry. However, the concept has potential and the format provides a low-risk means for Amazon to dip its toe into the world of physical retailing. It is also no secret that Amazon has its eye on the UK as a potential market for its disruptive checkout-free Amazon Go format.

Emerging technologies also have the potential to reinvigorate physical retailing. Whether it be ultra convenience concepts like Amazon’s Go format, digital mapping of stores or use of augmented reality, the ability to harness digital technology and create more seamless links between online and physical spaces presents major opportunities for traditional and online retailers alike.

A final consideration is the potential for an online sales tax. This would level the playing field between online retailers and the high street heavyweights whose businesses struggle under the substantial cost pressure of business rates. While the introduction of any tax would need to be approached carefully, proceeds could be used to modernise high streets for the needs to today’s shoppers.

Make no mistake, the UK’s high streets face major challenges, but I firmly believe there will always be demand for physical retail spaces - just not necessarily the types of retailers and spaces we’ve been used to. Experience will be the key to success, digital integration essential and I expect the most successful owners and property managers will need to offer more flexibility for tenants– not just in terms of space but also leases that facilitate innovation and newness.

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