Three key areas to focus on around the ‘reinvention of retail’
The retail industry has changed significantly with Covid, but the light in the cockpit for shareholders, chief executives and trading directors was already flashing and has been for many years.
Nobody considers Amazon the young ‘unsustainable’ disruptor anymore, smartphones and tablets are no longer nice to have but essential to day-to-day life, and the city center is no longer the mecca for shoppers or professionals. Covid accelerated all these trends by five, ten, 15 years or more. It didn’t start the monumental shift we are seeing in retail now, but it might well finish it.
As part of The Drum’s Deep Dive into the retail industry, there are three key areas worth focusing on that I believe are driving the ‘reinvention of retail’:
They have moved online in their masses, with online rapidly becoming the primary sales and marketing channel for all retail, with the exception of grocery where impulse and freshness still drive a trip to the store. Online demand has surged because more channels (search engines, marketplaces, social platforms) are competing in the same space across the buying funnel, making it easier to buy with great purchases only ever two clicks away.
TikTok is a prime example, growing its active userbase in the UK by more than 15 million in the last two years. The platform might be young, but it now holds easily-influenced audiences who were previously ‘off grid’. I can also tell you 2020 was the best year ever for ad revenues from Google Search marketing, so there is incremental growth across all online.
Consumers’ relationships with stores have changed forever. The high street is no longer a sustainable model: it doesn’t have the ‘pull’ provided by clusters of bigger stores, meaning that footfall into smaller stores has taken a significant hit. Out-of-town ‘developments’ are on the rise, becoming the new destinations for mid-market shoppers on a budget and a time-frame.
The likes of TK Maxx and Aldi have led the charge with this change, locking in and developing prime locations, and they will reap the benefits in years to come with long leases and direct investments into the ‘retail parks’ themselves. The net result is not looking good for landlords, who are increasingly pushed on rental margins and thus have less to invest in the premises themselves.
Expect more bookies and charity shops to pop up on the high street where you might have previously seen Dorothy Perkins or Bon Marché.
The role of a brand has changed rapidly and will continue to do so. Traditional brands such as Debenhams relied on their ‘loyal’ customers and high street labels. Disruptors cornered emerging customer niches with collaborations such as Nike x Dior, local communities and fans (marketplaces such as Friends of Joules), as well as the adoption of payment solutions including Klarna, which is now a key step in the purchase decision. Brand trust is key, but this is underpinned by the service levels.
Online has commoditized so much of retail, with comparison shopping sites such as our own Productcaster ensuring the best price is always found. Customers need to know the product will arrive quickly, with flexible payment solutions and hassle-free returns.
Next is probably the best example of a retailer building new features, partnerships and business models on top of what is a great brand with a large and loyal customer base. I expect it to go from strength to strength in the coming years, knowing it read the winds of change well before the pandemic and is starting to move faster than any of its traditional competitors thought possible.
Article written by Martin Corcoran for thedrum.com on August 25, 2021.