Independent retailers fear future of the high street

Fewer than half of SME (Small to Medium Enterprise) retailers expect their businesses to be thriving in a decade's time, according to new research which throws further light on the scale of challenges facing many of the UK's independent physical stores.

A study undertaken by finance solutions company Duologi found 46% of SME retailers expect their businesses to be successful in 2030. The survey was conducted among 500 retail companies.

Duologi has said that exceptionally poor trading conditions in the final quarter of 2019 may have contributed to the downtrodden mood among those companies that took part in the research. BRC figures showed 2019 to be the worst year on record for retailers, with physical stores performing especially badly. In-store like-for-like sales of non-food products saw a 3.8% drop over the three months to December compared to the same period in 2018.

Nearly a quarter (24%) of the retailers which took part in the SME study say that keeping up with new in-store technologies is the biggest single challenge they face, due to the cost of technology and the speed at which it is evolving – making it difficult for smaller companies to know when and where they should invest. This problem was perceived by participants in the survey as being especially acute in the sports and leisure retail sector, where 57% named it as their biggest headache. Jewellery (54%), health and beauty (53%), and fashion retailers (45%) faced similar levels of pressure when it comes to keeping up with the Joneses in terms of latest in-store tech.

Overall, one in ten SME retailers said simply keeping up with the changing demands of modern consumers is a struggle. This includes access to complicated services such as POS (point of sale) finance – which more than a quarter of consumers now say they expect from retailers if they are to shop with them.

Duologi CEO Michael Bevan said, “Some retailers are continuing to go through a tough time, with the struggles of the high street well documented in the press. However, the problems of retailers, in particular small and medium sized businesses, are multifaceted and there isn’t one simple solution to easing their troubles, although, recent research found that a lack of payment options has been shown to reduce online sales by up to 30%.”

Further afield

The problem may not be confined to the UK. Scope Ratings said 2020 will see a host of European retailers struggle to increase their margins after years of cost-cutting, which has left them needing investment. Consumer expectations of lower prices and better service are compounding difficulties in a competitive market, said Scope analyst Adrien Guerin.

“We expect the shift to smaller, convenience-style formats to continue,” said Guérin. Who predicts retailers will increasingly turn to franchising to reduce development and operating costs, signing agreements where the franchisee takes charge of the ownership and operation – so-called “FoFo” formats – of the stores.

Spending on new store concepts will rise too, said Guerin, as companies experiment with a wider variety of formats. Development of shops within shops will increase, with a focus on innovative services and trending or curiosity products. “Proposing distinctive but sought-after products at affordable prices while raising the satisfaction rate of in-store shopping and gaining customer loyalty will be the big test for the sector,” he added.

The Duologi report comes shortly after research which showed that abroad mix of independent retailers is a key factor in drawing shoppers to their local high streets. That report found that nearly two thirds of consumers in the Midlands considered independent retailers – generally SMEs – to be a key reason for them to choose local high streets for their shopping visits.