The Retailer Spring Edition 2023

THE RETAILER

34

WHAT’S IN STORE FOR RETAIL?

Karen Johnson Head of Retail & Wholesale Barclays Corporate Banking

B arclays Corporate Banking thought lead ership report, ‘What’s in store for retail?’ explores the drivers of change across the UK retail sector.

worth £42.4 billion a year.” ‘‘

The click-and-collect economy is now

As part of the hybrid offering, click-and-collect is reshaping ecommerce and is now worth £42.4 billion a year. This service grew phenomenally during the pandemic and there is clear evidence that it is here to stay. Retailers who offer click-and-collect report that approximately 40% of their sales – 8.4% of total retail sales – are currently generated via the service. Emerging technology can further power the consumer experience. More than nine in ten UK retailers have introduced an additional in-store customer experience in the past 12 months, and emerging technologies such as Virtual Reality (VR) and the Metaverse could soon be used to improve their shopping experiences even further. Data is a further opportunity for retailers. Only 32% of retailers say their business is sophisticated when it comes to using data, and only 28% are investing in capabilities in this space. This means that retailers could be well-placed to further explore the use of data when it comes to assessing consumer behaviour and desires. The rising cost of living is reducing spending, with consumers aiming to spend between 25%-30% less across all product categories but retailers remain confident as overall societal changes have altered spending habits. The combination of the rising cost of living and the change in work patterns (as a result of the pandemic) is contributing to an increase in in-store shopping. Consumers are shopping more frequently but spending less each time, with many people associating in-store shopping with better offers. Notably, some consumers are reverting to cash payments to help with budgeting. Employment is also evolving for the industry and we are seeing a slight overall decline in employment in the sector as a whole. In 2022, Barclays' economic modelling shows that there are around 2,488,000 people employed in the retail sector (not including microbusinesses). This is down from 2,592,000 in 2017. Automation in fulfilment centres is a likely driver of this change, combined with reduced store numbers across the UK.

Through a survey of 600 UK senior managers in retail businesses and 2,000 UK consumers, our latest retail study shows how the role of the store is changing. An ever-evolving industry Consumers still associate in-store purchases with trust and safety, and from our research we identified that 88% of retailers perceive physical retail space as vital to their business. While 67% of consumers agree that there is a future for physical retail spaces, there is a clear demo graphic split here – just 54% of 16-24 year olds believe this to be the case, compared with 74% of over 55s. As a result, many retailers may now be considering how they can convince younger generations of the relevance and benefits of in-store shopping. Following the changes in buying behaviours witnessed over the course of the pandemic, retailers continue to lead the way on stores of the future by supporting as broad a span of consumer preferences as possible. Their offerings and technologies increasingly enhance and influence the consumer experience, ensuring the store remains a vital part of the buying journey. It’s possible that many may now look to continue to leverage the power of that technology to further entice younger generations through their doors. Omnichannel and hybrid are the way forward for retailers as we see the need to integrate digital and in-store experiences as fast becoming a standard industry expectation. Our research shows that although just over 50% of overall sales are driven by online interactions, the physical store remains a crucial part of the buying process. Retailers are finding that there are operational and logistical advantages to having both a physical and digital presence. Brands are responding accordingly, with omnichannel offerings becoming increasingly widespread.

Our research shows that the need to integrate digital and in-store is fast becoming a standard industry expectation.” ‘‘