The changing face of retail in the age of digitisation

Retail: the 2020 snapshot It’s no secret that high street retail in Britain has been struggling for the past decade. Since the collapse of Woolworths in 2009, it has been clear that something, somewhere, has been going very wrong on the Great British high street. In fact, currently it is increasingly rare to be able to walk down a British high street without seeing “closing down” posters slapped across windows, “all items must go” signs plastered across doors, or simply an empty shop-front where once there was a thriving business. Is there a future in retail? Despite the slow demise of a number of major high street retailers in recent years, retail in the UK is definitely not dead. In many cases, it is not even dying. Instead, high street retail is having to transform and adapt to changing circumstances in a new and hostile environment. High costs and falling footfall are forcing companies to make sure every penny is spent wisely. This in turn is driving businesses to reflect on new consumer spending habits, as well as pushing them to learn how to integrate their online and offline businesses effectively. In reality, it is only the businesses that have failed to move with the times that have collapsed in such dramatic fashion. Where high street retailers have successfully combined their online and in-store businesses to create a single symbiotic entity, they have demonstrated significant profitability. That is not to say there is no crisis on British high streets - with over 140,000 jobs lost in 2019 alone, any such argument would clearly be a fallacy. It is clear there is a crisis, but it does not spell the end of high street retail; instead it is simply a part of the transition into the digital age. Importantly, the struggles of high street retailers have now been recognised by the Government, who in September 2019 launched a £95 million fund to help try and rebuild confidence in the UK high street. The programme aims to repair historic buildings and revitalise the image of high streets across the UK, stimulating commercial investments and repurposing disused sites. This will be combined with educational and training opportunities so that local communities are not being left behind when the money dries up, showing a move toward more sustainable investment in the UK high street. Why are all the shops closing down? It’s all well and good to suggest that it’s due to challenging business conditions and a failure to adapt to the realities of modern retail, but without establishing what that actually means, the information is next to useless. The key reasons noted by the Centre for Retail Research (CRR) for the widespread closures are: Prohibitively high costs - unlike the official government report, the CRR have widened the blame for store closures, not focussing on the online competition, but instead including factors such as the high costs of rent, business rates, and the growing cost of labour. Rapidly growing online competition - while the CRR have suggested this is not the only factor behind store closures, it is certainly a major one. The Office for National Statistics has released data showing that as of 2019, 19.2% of all sales are conducted online, up from only 6.2% a decade earlier. Low profitability - due to the drop in physical sales at brick-and-mortar stores, the profit margins of high street stores have plummeted. Rising costs have only made this worse, all compounded by the poor consumer spending that has plagued the British economy since the 2016 Brexit referendum. Lack of preparation - finally, the CRR suggests that many stores have suffered from poor investment from their parent companies, meaning they simply have not been able to prepare for the new retail environment. What shops have gone into administration? Since 2007, a total of 508 retailers have gone bust, directly impacting almost 35,000 stores - that equates to approximately 42 failed retailers and 2,860 stores impacted each year, a truly staggering number. This has included a number of major companies such as Woolworths, British Home Stores (BHS), Toys R Us and Mothercare. While not all these businesses failed fully, with Mothercare still operating over 900 stores in forty countries, this is still a remarkable number. In 2019 alone, some of the major names to enter administration were: Jessops - In December 2019, Jessops collapsed into administration for a second time. While it was saved in 2013 by a buyout, this has not yet been repeated, placing 46 outlets and 500 jobs at risk. Clintons - In November, Clintons went into administration, placing 334 stores at risk. While it was able to rescue itself, it is not a permanent solution, and without major restructuring the process of administration will repeat itself in the near future. Mothercare - Mothercare announced it was calling in administrators in the first week of November 2019, saying its 79 UK stores were simply not capable of achieving sufficient profitability. Analysts suggested that its failure was down to its slow adaptation to growing competition, and slow move into the online space. What retailers are in trouble in 2020? In 2020, a number of big names are still struggling. These include: Marks and Spencer - with plans to cut costs through the closure of 100 stores, despite a £25 million investment into their technology transformation plan, M&S clearly has a tough year ahead in 2020. H&M - despite a strong international performance in Q3 2019, the Swedish clothing giant saw a 68.4% drop in profits within its UK arm, highlighting that the year ahead may be bumpy. Boots - following an announcement that it was intending to close over 200 stores as of June 2019, Boots has seen its profits falling at a worrying rate. With an 18.3% profit drop visible in their accounts submitted to Companies House, it is clear that Boots needs to adapt to the realities of modern retail. House of Fraser - despite attempts to rescue the chain following being bought out by Sports Direct in 2018, House of Fraser began 2020 by predicting the closure of a number of its remaining stores. Individual closures have now begun, and with losses predicted at £1 million per week, House of Fraser is in for a challenging year. Debenhams - much like House of Fraser, Debenhams began 2020 badly, announcing the closure of a number of its major stores. With nineteen stores closed in January alone, Debenhams is clearly fighting for its life. Can digitisation save the Great British high street? The good news for those working in UK retail is that all of the big name companies mentioned above have also made large investments into digitisation in the past two years. Firstly, Marks & Spencer have invested £25 million into their digital transformation plan, aiming to become a digital-first business and H&M are already midway through the process of integrating their online business with their in-store experience. Boots has also begun a major overhaul, with their new managing director pushing for a total transformation, led by the opening of a new concept store that looks to bring the retail giant up to speed. What does digital transformation actually mean for retail? Despite originally being an online business, Farfetch founder and CEO José Neves echoed the belief in brick and mortar stores still retaining importance. In a press release following the purchase of Browns boutique by Farfetch, he stressed that the future of retail “won’t be purely online”, and will instead be “a seamless merge of a fantastic physical experience with powerful, yet subtle technology.” As such, what the digital transformation means for retail is integration of the digital and physical, centred on the use of technology. How can technology be used in retail? Technology can be integrated into retail in a range of ways, varying from directly including technology in stores, to transforming outlets into a catalogue retailer based around click-and-collect depots, or even just making sure that customers can handle their entire journey in-store through an app. This could also mean a transition to an “experience”-driven outlet, where consumers do not necessarily go to purchase products, but instead to do something they cannot easily or affordably replicate at home. A good example of this would be that technology stores could begin to include VR labs or similar experiences to draw in customers, while also still advertising their products. Technology can also be integrated on a more indirect level, for instance allowing visitors to check that a specific item is in stock at an outlet before they set off, saving them from potential time-wasting. This emphasis on hassle-free shopping will become increasingly important, especially as members of Gen-Z and their successors develop more disposable income. What retail companies are growing fastest? Unsurprisingly, many of the fastest-growing retailers in the UK began as e-tailers, but many of them are beginning to expand into brick-and-mortar stores to supplement their online presence. What is of real importance, however, is that the fastest-growing retailers are all continual innovators who place a premium on research and adapting to the new retail environment. These fast-growing retailers include: Farfetch - the fastest-growing retailer in the UK currently, Farfetch has achieved a year-on-year average growth of 67.4% for the past three years. Their brand is extremely effective at bringing independent stores together to build collections, offering an ease of access to consumers that simply wasn’t plausible previously. In 2015, they purchased Browns boutique in London, aiming to use it as an incubation lab for their move into bricks-and-mortar retail. Missguided - first achieving a physical presence in November 2016, fashion retailer Missguided focuses on the 16-35 female market. With an ability to achieve high speed turnaround heavily inspired by their digital routes, they have established themselves as a major force in retail. This has been helped by consistently high growth. Oak Furniture Land - originally founded in 2004, Oak Furniture Land began life as an eBay seller, before launching their own website in 2006. They launched their first physical location in 2010, and as of February 2020, now have 98 outlets. Within their accounts submitted to Companies House, they openly state that their success is due to evolving effectively and being early movers with regards to integrating digital, mobile and physical retail. Elizabeth Walker, commercial director for Distinctly who works on the digital proposition for Arsenal, Insinkerator and BoConcept discusses the changing face of retail moving forwards and why a digital business plan is key for retailers to continue growing.

The changing face of retail in the age of digitisation

Check out our free weekly podcast

Read Next

How Temu approaches product safety

Clare Burrows: establishing a pioneering footwear brand from scratch

From classroom to commerce: How Alok Ruia reinvented SockShop

Makeke: The app helping independent retailers take on ecommerce giants

Elevating retail with intuition, strategy, and people-first leadership

How Temu approaches product safety

Clare Burrows: establishing a pioneering footwear brand from scratch

From classroom to commerce: How Alok Ruia reinvented SockShop

Makeke: The app helping independent retailers take on ecommerce giants

Elevating retail with intuition, strategy, and people-first leadership

Today’s news in brief-21/2/25

Aldi to increase store assistants’ pay from March

Primark to open first standalone homewares store in March

UK retail sales rise by 1.7% in January

Aldi to invest £67m in existing stores in 2025

Frasers Group withdraws offer for Norway’s XXL ASA

Check out our free weekly podcast

Read Next

How Temu approaches product safety

Clare Burrows: establishing a pioneering footwear brand from scratch

From classroom to commerce: How Alok Ruia reinvented SockShop

Makeke: The app helping independent retailers take on ecommerce giants

Elevating retail with intuition, strategy, and people-first leadership

Related Articles

Today’s news in brief-21/2/25

Aldi to increase store assistants’ pay from March

Primark to open first standalone homewares store in March

UK retail sales rise by 1.7% in January

Aldi to invest £67m in existing stores in 2025

Frasers Group withdraws offer for Norway’s XXL ASA