By guest author Ben Stevens from Retail Gazette
As the least successful retailers leave the high street to focus on the less-costly online format, a new opportunity for the most successful online retailers has emerged to take their place. We explore those retailers making the jump from clicks to bricks
Between the turn of the millennium and 2009, online retail sales increased by some 5000 %, accounting for just under 7 % of total retail sales for the year.
Another nine years later, online sales now account for 17.4 % of the UK’s total. In June, online retail sales grew by 17 %, like they have done for nearly every month since 2000.
In the same first nine years of the century, high street retail sales recorded growth of just 21 per cent. Last month, in-store sales fell 1.7% – the worst figure for 12 years.
The widespread exodus to online seems not only indisputable, but destined to continue accelerating. Why then are so many of the world’s most successful online retailers now opening stores on the high street?
Amazon – now the UK’s fifth largest retailer despite being an online pureplay – acquired the Whole Foods grocery chain last year, and has launched checkout-free grocery stores under its own branding in the US, making no bones about its intention to expand its physical presence.
Missguided, one of the new wave of online fashion retailers which has seen staggering levels of sales and profit growth over the past year or so, has now opened two physical stores in London’s Westfield and Kent’s Bluewater shopping centres.
Other retailers like Boden and Joe Browns, which both started as catalogue retailers, have also branched into physical retail in recent years, with the latter opening its first store in Sheffield’s Meadowhall shopping centre last November.
Other online-only fashion retailers to have branched out to bricks-and-mortar retail include Blaiz and Zalando, which opened a beauty store in Berlin just last weekend “Despite online retail booming and many high streets unfortunately struggling, the time was right for us to take this new opportunity,” Joe Brows founder and managing director Simon Brown told the Retail Gazette.
“We have not been afraid to buck the trend and venture into retail as many shops withdraw their presence from the high street, as we’re confident our distinctive and unique collections offer people something different with exciting designs that express their individuality.”
These retailers are clearly taking a significant risk, and one they will be acutely aware of given the increasingly frequent headlines of high street doom and gloom.
Their justification for leaving the relative safety of online retail is not simply to maximise their potential routes to sale, but more as a showcase for their brand.
For them, the risk of heavy overheads and venturing into entirely new retail territory is offset by the opportunity to immerse their customers in their brand in a way impossible in the digital realm.
“Customers have told us they love to step into a space where they feel fully immersed in Joe Browns’ uniquely captivating and colourful world,” Brown said.
“It has brought to life, in a three-dimensional space, the bold persona of our brand and our distinctive handwriting.
“For us the decision has been successful, but clearly there are many risks attached. We are so far proud to have overcome these, however this step may not be right for every pure-play retailer looking to expand its retail offering.”
As the least successful high street retailers are leaving the high street to focus on the less costly online format, a new opportunity for the most successful online retailers has emerged to take their place.
David Pomeroy, head of the restructuring and insolvency team at Ashfords LLP, believes this could transform the high street as we know it today.
“It will look very different in a few years as a result of recent changes – and this represents real opportunity for innovative ideas for using the space, whether you are a big brand or a small independent,” he said.
The digital shopping revolution has also created a new landscape in which the roles of both online stores and the high street have changed in the eyes of the consumer.
As Echo-U’s director of customer services Mandy Holford points out, customers now have access to the best of both worlds, and demand retailers meet their needs.
“Customers still appreciate the social and sensory aspects of in-store shopping and face to face advice but they also want their online and in-store experiences to complement each other,” she said.
“They want to be able to order online the car they see in the showroom and they want to be able to access the same free samples and discounts from in-store make-up counters that they can get online.
“Successful retailers will be those that are thinking of the entire customer journey and how they can link all the shopping outcomes for the best customer experience.”
For online retailers looking to venture offline, it is vital they take heed of the new needs of shoppers on the high street, offering more than simply products on shelves.
Pomeroy added: “When the high street first evolved, people wanted a shopping experience, somewhere they could ‘stick around’ and enjoy the destination, combining shopping with eating, drinking and socialising.
“They wanted to experience something different every time they came back, not the same sterile warehouse environment of the out of town mall or the chain store where everyone in every high street looks the same.
“Whilst sitting at home surf shopping might be convenient and quick, it also doesn’t create an experience. I think in many respects; the high street has gone full circle.”
Missguided’s recent physical offering seemed to have taken all these factors into account, and then some. It offered a WAH Nails and Keash Braids concession, a giant pink monster truck, seating areas and some of the most outlandish décor seen in a retail store.
Shoppers were given an experience like no other and given a reason to stay in store other than its products. Despite this, its offline experiment seems ill fated.
Six months after it opened its second store and just over a year after opening its first, Missguided revealed it had entered the red for the first time.
Following months of consecutive double and often triple-digit growth, the fashion retailer’s operating profit slipped from GBP 381000 in 2016 to a GBP 1.45 million loss last year.
This week it was reported that the retailer will now seek to “scale back” its physical presence, potentially downsizing its two stores and returning its focus to online.
Although physical retail’s current challenges are creating huge clicks-to-bricks opportunities, they are still clearly enough to spell failure for some of the most successful and innovative brands.
Until these current headwinds ease, only the very brave and the very lucky will be able to succeed in place of where so many high street stores have failed. Thankfully, the world of online retail has plenty brands willing to give it a go, and only time will tell, which will succeed.