Will physical store cull lead to retailer regret?

With all non-essential stores closed by government decree in a bid to halt the Covid-19 pandemic, and shopper routines and preferences thrown into disarray, it is easy to have missed other developments in how retailers are managing their physical store estates.

Fashion retailers have been shifting gradually, over some years, to a business model that uses fewer – if larger – stores to better suit the way their customers now shop. Now retailers in sectors as diverse as technology and cycling are undertaking a substantial review of their store portfolios, in a move that could easily be overlooked during the more topical crisis facing retail.

Carphone Warehouse customers will need to visit large group stores in the future as small branches are closed
Carphone Warehouse customers will need to visit large group stores in the future as small branches are closed

Earlier this month Dixons Carphone announced that it would be closing all 531 of its standalone Carphone Warehouse stores, after its mobile division recorded losses of £90 million. Instead, the brand will rely on concessions within larger group stores – the '3-in-1' stores that combine Currys, PC World, and Carphone Warehouse – and online sales. Around 2,900 in-store jobs will be lost at the Carphone Warehouse stores, with the remainder of staff redeployed, as the mobile group is merged with the rest of the business.

Dixons Carphone group chief executive Alex Baldock says customers are changing the way they buy technology products, and that the retailer must adapt and change with them.

“Customers are increasingly heading, not just to our large and growing online business, but into our big stores, where they can find all the experts and tech  – mobiles, computers, TVs, smart tech, appliances, gaming and all the rest  – they need. But they can’t find all this in the small mobile-only stores that are one twentieth of the size; they’re visiting these less and these stores are losing more money as a result,” says Baldock.

“That’s why we’re committed to our more than 300 big stores around the UK, why we’re investing tens of millions of pounds in them and in the thousands of expert colleagues who work in them. But it’s also why sadly we have to close the small stores,” he explains.

Meanwhile automotive and cycling retailer Halfords has pulled the plug on its Cycle Republic brand, closing all of it stores and its Boardman Performance Centre. While closing the physical cycling stores, Halfords said it was reaffirming its commitment to the performance cycling sector by increasing its investment in online cycling brand Tredz.

“We are committed to the mainstream and performance cycling markets and the good growth opportunities we see in them. We believe we are better able to maximise this growth if we focus our investment and resources in Halfords and Tredz, through which we deliver market-leading specialist propositions for both mainstream and enthusiast cyclists,” says Halfords CEO, Graham Stapleton.

Different touchpoints

However, Rebecca Crook, chief growth officer at digital transformation agency Somo, says some retailers may regret not having a physical store offer at a later date – when customers are seeking a more seamless transaction over multiple channels. “Now may be a good time to bury bad news... but with a big purchase, high-value item, people are expecting an experience,” she adds.

“Just because somebody starts researching something on a website doesn't mean they are not going to go into a physical stores to purchase it, or touch or feel it. Then they might go back home to order it online. I think that's where the challenge is coming in for a lot of retailers. They are not looking at all of the different touchpoints for the customer.”

Brands such as Cycle Republic and Carphone Warehouse were operating in competitive markets, and ones where often customers were as well-informed about the specialist products as the staff were, said Crook. Shoppers are beginning to expect better – and if they are happy to buy online they can often get better deals by buying directly from brands, she exaplins.

At present, shoppers are being pushed into trying new technology that may have held little appeal to them when they were able to leave their homes. Massive numbers of shoppers have signed up to use grocery home deliveries for the first time, for example.

Will these shoppers return to more familiar shopping patterns when the Covid-19 crisis subsides, or will they move on to new ways of shopping? Retailers which shed their physical stores and rely purely on home delivery services may be on the receiving end of some harsh lessons, depending on what consumers decide.

Negative message

“The key point... with store closures is that it sends a negative message unfortunately: firstly, that as an overall business perhaps you’re not doing very well; and secondly, that the people in that location/high street/town aren’t actually very important to that brand,” says Andy Halliwell, senior director at consultancy Publicis Sapient.

There is a risk of unintended consequences, adds Halliwell: “Store closures have number of indirect impacts on the business – the store was acting as a huge billboard in a high traffic area that meant the brand was at the front of people’s minds. When that is no longer there, it’s that much easier for people to forget about you as a business, so if you’re trying to move people online, you will need to invest that much more in targeted advertising in the areas where stores were closing to try and retain those consumers as loyal shoppers.”

Closing stores mean retailers lose an opportunity to offer a branded omnichannel experience, says Halliwell – including the ability to offer click & collect services or a desk for returns. “It’s critical to ensure you have a suitable replacement service that enables some of these kinds of propositions – Doddle or Amazon Lockers for instance,” said Halliwell.

Retailers which have evolved a strategy of closing stores may slip away with little attention, as we focus on the essential closures linked to the Covid-19 crisis. But that does not mean that they won't find themselves regretting those decisions in the future.