TheRetailer_Autumn_2019

A NECESSARY EVOLUTION

PHILIPP GUTZWILLER HEAD OF RETAIL Lloyds Bank Commercial Banking

DESPITE STORMY SEAS ON THE HIGH STREET, THE UK’S LARGEST RETAILERS ARE EVOLVING AND PUSHING AHEAD WITH THEIR GROWTH PLANS. These are uncertain times for the UK’s retailers. As changes in consumer trends continue to move at pace, it has become increasingly difficult for retailers to ensure customer loyalty, grow sales or protect margins. And, while many are recognising the importance of dovetailing their in-store offering and online presence, we’ve also seen that simply combining the two is by no means a panacea for the sector’s challenges. But amid the gloom, there’s a quiet confidence among the UK’s larger retailers that, through intelligent evolution, continued growth is well within their grasp. Our recent Business in Britain report more than attests to this. Speaking with business heads across the sector (all with turnovers in excess of £50million), almost three-quarters (71%) said they expect to increase their turnover in the next five years, with the majority expecting to grow their workforce as well. Key to the positive outlook is a tightening of strategies to control the ‘controllables’ and fend off becoming one of a number of casualties on the high street. We’ve seen brands invest additional time and resource in reviewing, refining and developing clear plans for the short, medium and long-term. As a result, they’re presenting more defined business models. Often these see a clearer definition of who they wish to appeal to emerging. This clarity supports more informed decision making on everything from the stock they hold to the location of their stores or interface of their sites online. Finding a future for bricks-and-mortar Common across retailers, regardless of sub-sector, is the refining of traditional bricks-and-mortar models. Our study found that more than half (55%) have taken steps to reduce the cost of their store footprints, with rent negotiations (43%) the most popular option. As many as a third (34%) have shut stores in the past year and a similar proportion (35%) expect to close shops in the next 12 months. Clearly, though, amid these longer-term real estate strategies, there remains the headache of attracting customers back into stores. Consumer appetite for the convenience of online shopping is unlikely to abate, which poses retailers with the challenge of making stores more attractive as a destination. So how do they plan to buck the trend and bring customers back?

Improvement in-store In the next 12 months, the most common investment in the sector is likely to be in in-store customer experience. UK shoppers are among the most sophisticated in the world, and retailers need to adopt a creative approach to ensure they keep up with their lifestyles and expectations. Notably, almost two in every five (39%) retailers plan to focus on this element of their strategy in the coming year, with many already investing in increased staff training, reducing friction at the point of sale and looking to do the basics better by refining their offer. Click-and-collect services (37%) are seen as the next most powerful tool in increasing footfall, while we can also expect to see an increase in in-store events (35%) as brands look to make shopping with them more experiential over the next 12 months. Apple’s ‘Today at Apple’ sessions are a great example of this in action, with the tech giant now offering creative sessions with artists and partners to inspire customers in its retail stores. Investing in diversification While these figures point to some relatively familiar approaches, it’s also apparent that current market headwinds are driving an uptick in retailers diversifying their offer more radically to stand out. Making better use of customer data (26%) and engendering customer loyalty (25%) are both significant focuses for large retailers and, as such, have become driving forces behind this diversity. Speaking to customers, it is clear that brand affinity has become harder to come by. As a result, retailers are using data to better understand their customers and then developing either new or emotive concepts such as unmanned stores, clothes- sharing and eco-friendly brand campaigns to secure their custom. This approach is altogether easier for the UK’s larger retailers who, in the main, have established loyalty programmes that provide opportunities for data mining and enable them to point customers in the direction of the increasing number of additional services that are also becoming a key focus. Notably, when we asked retailers about their main opportunities for turnover growth in the next five years, expanding services was a frontrunner – alongside new operational tech, increasing their volume of sales and M&A activity.

28 | autumn 2019 | the retailer