A drive down any small town high street will confirm the statistics – that the high street is dying. In the UK the British Retail Consortium estimates that 11.3% of shopping units are empty. The Local Data Company puts that figure at 14.3%.
Analysis by CACI shows that the prospects for 2,750 of the UK’s 4,000 shopping locations (including high streets, out-of-town centers and large malls) are so poor that they may struggle to survive as viable locations for retailers selling non-food items beyond 2015.
It seems that the USA is again leading the trends. Whilst the UK laments the death of the high street, this decline started years ago in the USA. Kaid Benfield recently wrote in The Atlantic that the rise of shopping malls spelled the demise of small downtowns, and this started in the 1960’s.
But now the dominance of the fashion, food-court and family-focused mall is ending. And the decline started some years ago. No new enclosed malls have opened in the U.S. since 2006. General Growth Properties, one of the largest mall operators in the country with more than 200 properties in 44 states, entered Chapter 11 with debts of $25 billion in 2009.
As more stores have closed, the last couple of years has seen mall vacancies at their highest point in almost a decade, according to Reis, a research company, which said the vacancy rate of regional malls is 8.6% and Neighborhood and Community malls (strip malls) is 10.7%.
Who is to blame?
Government’s are searching for an answer to stop this decline as they seem to believe that a thriving town centre or mall leads to a happier community. So where do we look for the “culprit”.
- Is it the rise of on-line spending? Certainly on-line spending has increased dramatically with this Christmas being the largest ever. But retailers are being hit with a “double-whammy”. Shoppers are using their stores to look at products and then using apps on their phones to compare prices on-line, often choosing to buy online and have the convenience of home delivery.
- Large soul-less, but cheap, supermarkets? The supermarket experience is very sterile and utilitarian. You can fill your basket, pay and leave and need never talk to anyone. With the economies of scale that drive down price and the convenience of “open all hours” you can understand why they are successful.
- Small retailers failing to meet expectations of shoppers? The shopper now is fare more educated and sophisticated. The internet enables global price comparison and unlimited choice, all delivered within a day or two. No small retailer can hope to compete, unless the product requires specific personal attention.
So, the answer for the politicians is that it is all 3 trends are causing the decline, none of which are reversible. So looking for answers is pointless (although it may win them votes).
Why fight these forces? Just like the print industry and the music industry have had to change with the onslaught of digital disruption, surely the retail industry needs to understand that it needs change. Forrester highlighted the impact of the combined forces of social, mobile and cloud in what they called the Digital Disruption, which is summarised in this blog.
This new world is on-line, self-service and can be a very “cold” experience. The alternative is a cutesy / charming village centre. But charm costs time and money. You have to visit 6 or 7 shops, and one might be closed. And the total cost of your shopping bill will be higher. Most shoppers are time poor and money poor and for them this sounds like an unaffordable luxury.
Charm may be a luxury, but does the customer service experience need to be so unpleasant or in some cases, non-existent? The answer is no, but with increase in online purchases much of the customer experience (broader than customer service) is set by the delivery service which is outsourced to courier companies. And in many cases couriers don’t deliver as this blog explains, and it tarnishes their great on-line experience. Not that every company’s online experience is that great, as this brilliant Google video illustrates. Think back to your latest purchase online from a smaller vendor.
What can retailers do?
Firstly, they need to think about the overall customer experience, from thinking about purchasing something, search and comparison, selecting and paying, and finally delivery / collection.
Depending on the market, retailers they could decide to mimic Apple or Burberry who have made the store retail experience fantastic. But that requires a high margin product.
If they have a highly competitive, commodity product then online may be the only way. But there can be some differentiation around delivery or collection. For working families, getting parcels delivered is a pain. So the retailer could identify partners who have physical premises and can provide a “Click and Collect” service. Retailers should be creative and look outside their normal partners or competitors. Shoppers want to collect their purchases after work, so what businesses are open in the evenings, but also during the day to take deliveries?
The future is different
Using the latest technologies can improve every aspect of the buying cycle, but it requires process thinking and then technology overlaid on top of it. We can wish for the small local stores that are the centre of the community, but those days are gone.
Retailers need to move on and grasp the new challenges. Those that are successful embrace the world of on-line but combine it with an exception customer experience.
Town planners and local groups need to rethink how they will build communities.