The High Street In Trouble
The news at the moment is full of stories about large high street retailers in trouble. If you own a retail business, or are planning to start one, this might worry you. Is now really the time to be going into an industry that is in so much turmoil?
A new cycle
These current problems are part of a new cycle for the industry. If you look back at history, before the 1950s large chains just didn’t exist.
With the “baby boomer” generation came larger chains that could buy goods cheaply from China and have them shipped to the UK at rock-bottom prices.
Chain stores grew rapidly over 50 years, boosted by customers happy to buy standardised products at low prices. This forced many smaller independent stores to close.
Online retail is usually blamed for the current problems on the high street. The unstoppable rise of online-only Amazon is held up as the ultimate retail success story.
While it’s true that eCommerce has grown hugely over the past decade, it’s not the only reason for the current state of large retailers.
For retail businesses, it is no longer the case that bigger is always better. Manufacturing goods halfway across the world and shipping them to the UK keeps getting more expensive. Energy, wages and transport costs keep rising. The pound is weak, making imports more costly now than before the Brexit vote.
Business rates changes and the living wage increases cost large chains millions of pounds. The price of doing business keeps getting more expensive.
According to the British Retail Consortium, across the large chains net profitability has fallen from 6-8% of sales pre-2007 to 3-5% today. In other words, even those with massive sales only make a tiny percentage of that back as profits. And over time, that percentage is shrinking.
These businesses also have expensive, complicated and aging computer systems that are no longer working for the modern reality of retail. Customers expect to be able to browse online, try things on in store, purchase from their mobile device and pick up packages from a location of their choosing. Older systems struggle to keep up with this “everything, everywhere” mindset.
Replacing them costs millions and causes huge disruption. It isn’t that surprising that most of the fastest growing UK retail companies are often younger companies with flexible systems and smaller costs.
The only question that remains is how many of these big chains will be able to transform themselves into flexible, modern organisations before they go the way of Maplin and Toys R Us.
The rise of the “me” culture
Another reason for the failure of big chains is because of the increasing interest people have in standing out.
Personalised shopping - whether it’s goods that are tailor-made for you or just that personal touch during your shopping experience has become more and more important for today’s customer.
Where do you fit in?
2018 is a fantastic time to be an independent retailer. There are so many opportunities for new and existing independent retailers to reach out and gain new customers.
Just think - 10 years ago, having a shop would have meant a lengthy lease, and having a website would have meant thousands of pounds of development.
Today, pop-up shops and markets are everywhere, and building your website is easy and cheap.
What is more, who is better positioned to reach out personally to customers and build communities than small retailers with a clear vision of why people should shop with them?
Wherever you look, you see hundreds of small businesses opening up. They are filling in the gaps left by the bigger chains falling behind.
The future of retail is here. Are you ready to be part of it?
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