Why are so many retailers failing?
First, it’s important to establish why so many retailers are being reduced to filing for administration as the only way out of their situation. A new report by abc Finance looks at the main causes of administrations over the past ten years. It concludes that the top reasons for retailers failing are:
Rising overheads like rent on retail units
Overexpansion and the associated debts
Changing customer behaviours and expectations
Lower expendable income for shoppers
It’s true that some of these factors are unfortunate major shifts in culture and behaviour that have proven difficult to respond to. For example, the fact that people are buying more online and less in bricks and mortar stores isn’t likely to change any time soon. However, meeting changing consumer expectations is something retailers can do something about and many are realising this, stepping up to the challenge and succeeding.
Some 41 per cent of the retailers that have fallen into administration over the past decade have been clothing retailers. Having been the hardest hit of all the retail sectors, anyone tasked with turning around a struggling clothing retailer will be feeling daunted by the task. But that isn’t to say it’s a losing battle.
Responding to changing consumer behaviour is key
Another abc Finance report into the future of the UK high street polled a number of consumers in the UK about their attitudes to the decline of the high street and to shopping in general. It came up with some interesting findings:
56 per cent said they prefer to shop in small independent retailers than in big high street chains.
75 per cent said they felt saddened about the decline of the high street
Only 28 per cent said they prefer shopping in person, in store, while 38 per cent do most of their shopping online.
Anyone looking to buy an ailing retailer with the aim of returning it to profit needs to pay attention to these results, and others providing insights into consumer attitudes.
It’s clear to see that one of the main draws for people shopping in person is a unique, independent-feeling experience, rather than shopping in a soleless chain store.
The report also found that stores that are doing well tend to be experience-led, such as coffee shops, nail bars, tattooists, restaurants and vape shops. Those struggling to survive are more traditional retail-focused offerings, suggesting that people want a sociable, experience-led store when visiting their high street, rather than simply to make a purchase. Let’s face it, they can do this from the comfort of their home, online.
So who’s getting it right?
Here are some examples of retailers that have been agile enough to respond quickly and effectively to changing market conditions in order to succeed where others have failed.
This sporting goods and clothing retailer is going from strength to strength, thanks to its customer focused approach and agile capabilities.
It has certainly benefited from the fact that sportswear has become very fashionable as everyday wear over the past three years, leading to rapid growth. However, it has capitalised on this with great success by introducing collaborative lines, with popular stars, such as Rita Ora and Lucy Watson, from Made in Chelsea.
From an in-store perspective, it has recently introduced new feedback technology to its POS system, which asks customers a question as they are making a purchase. Young customers like this tech-focused approach and JD Sports can use the data collected to further respond to consumer needs.
Lush has been around for 25 years, but is enjoying a whole new level of success on our otherwise drab high streets. Lush products are completely vegetarian and made on the store premises. This appeals to the growing trend for ethical consumerism, veganism and sustainability.
As well as fitting in perfectly with the zeitgeist, Lush is also unusual in offering a memorable and distinct in-store shopping experience. This is created by having a large number of enticing products displayed attractively, with fresh, ‘use by’ dates on the labels, reinforcing the fresh and home-made USP. The stores offer samples and the staff interact with shoppers helping them understand why they are passionate about what they do. You can even have a kids party at the stores, where Lush gets to appeal to the next generation of customers from an early stage!
SPAR, Londis and Warner’s Budgens stores
Faced with increasing numbers of people buying their groceries online, these retailers are meeting the challenge to bring shoppers back in store and boost trade by integrating new AI technology. They are all utilising a new app created by mobile tech pioneers Ubamarket. The app employs a variety of revolutionary features which helps retailers to revitalise the shopping experience for consumers, improving convenience and saving them money. Ubamarket have showcased an average increase of purchases in-store by 21% across the board.
Ubamarket’s own research into British shoppers found that a majority are happy for retailers to collect consumer data if they can benefit from money-saving opportunities.
Features include a supermarket sat-nav that guides consumers around the store; Till-less - customers scan products and shelves as they shop before checking out and paying in-app, completely bypassing queues and store checkout counter; Automatic loyalty points - app users get exclusive access to deals and offers; Dietary sensitive shopping - users can receive dietary and allergen alerts for every product and shop according to their individual dietary requirements; Environmentally conscious shopping - allowing users to immediately see which products have recyclable packaging, and information on the outlet’s environmental footprint.
Ubamarket’s CEO, Will Broome, says, “Technology gives shoppers a reason to get up off the couch and feel excited to shop in-person again, and at Ubamarket, we are committed to providing this technology to help traditional retailers not only survive, but thrive.”
What can we learn?
These success stories send a very clear message. In order to make a success of a retail space on the high street, you have to offer the consumer something that they can’t get online. They need to feel included in a social scene or that they are part of a community of consumers all enjoying a shared experience. They need to want to spend time in the store and talk to sales staff and other shoppers.
In order to achieve this, the first stage is establishing exactly what your customers want from their shopping experience, so thorough market research is essential. Don’t be scared to visit competitors or follow them on social media. It’s all about tuning in, if you don’t want to die out.
Multiples on retailers are close to the lowest over the past 10 years and aren low compared to other sectors. Low interest rates means money is still cheap. For sure there will be more retailers falling by the wayside - some will be solid brands that have failed through not providing the right experience for their customers.
They will be ripe pickings for smart acquirers who will pivot or transform the business to create a special shopper experience and restore the store’s relevance.
Is your business currently struggling? Here is how you could turn it around
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Established in the early 1900's. Traditional mixed dental practice. Free parking for all staff and patients. Shops and local amenities are within walking distance. Owner willing to remain working at the practice post sale if required. Offers invited.
High Street location close to residential area. Free on street parking. Plenty of shops and services are located nearby. Modern practice fully digitalised. Large shop frontage very eye catching. Offers invited.
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