Download a copy of the White Paper: The Great British Exchange White Paper – How to Survive this Retail Apocalypse
Being a retailer in 2018 is terrifying. In 2017, there were 5,855 store closures on the UK high street, more than in any year since 2010. In spring 2018, the industry suffered its worst two-month average in footfall since the start of the recession and the list of big name casualties continues to grow. The apocalypse feels to be indiscriminate, affecting long-standing high street giants as well as hardworking independents.
It may feel like a hopeless situation, but for the past three years here at The Great British Exchange, we’ve been researching a survival strategy which we are confident can be used successfully by retailers of any size, sector or location. Since 2015, The GBE has been playing a unique role in retail, sourcing UK-made products for stores that want to introduce newness and variety whilst also providing a route to market for emerging British brands. The intelligence we have built up over that time has delivered some powerful messages about how to do retail well and what the store of the not-too-distant future will look like.
Why It’s Happening
The majority of retail analysts blame a combination of economic factors and online purchasing trends for the current high street Armageddon. Our own research has found that there are three other key factors at play: The unique consumer behaviour of Millennials and Generation Z, the drive for experience over product and the relevance of Barbara E Kahn’s Kahn Retailing Success Matrix (The Shopping Revolution: How Successful Retailers Win Customers in an Era of Endless Disruption [Wharton Digital Press, June 12, 2018]).
- Buying without borders. According to retail think tank Fitch, Gen Z will be the largest consumer group globally by 2020, making up 40% of buyers in the US, Europe and BRIC countries. Accustomed to multi-tasking on a variety of technology and applications, retailers will only ever have Generation Z’s partial attention and need to work hard to attract even that. Crucially, they do not see online and offline as separate platforms; there is no border between their digital and physical world.
- Quality time. Everyone from Baby Boomers to Gen Zedders is focused on experience these days. For each electrical store or clothing outlet that disappears there is a new bar, restaurant, escape room or whatever materialising, ready to capture the spending capacity of those who now rate time with friends and family over new material possessions.
Doing everything well. As we’ll explore, retailers can no longer rely on being good at one or two things to survive. Barbara E Kahn’s now famous Kahn Retailing Success Matrix highlights brand, low price, experience and frictionless convenience as the four pillars of a good retail strategy. It used to be the case that the best retailers were those that led clearly on one of these four pillars but, today, retailers need to do them all well and they need to be exceptional at two of them. Further on we’ll look at different combinations and who is doing everything well.
Are Physical Stores Still Relevant?
Absolutely. Saying this, the physical stores we’re used to seeing with their generic product ranges and bland interiors will disappear.
This is not a prediction, it’s a fact and it’s already happening.
We want to look in detail at how all stores, large and small, can shift quickly to capture these uninspired shoppers and escape annihilation.
We believe the high street shop is here to stay; it has the potential to offer something that no other buying channel can – personality, service and experience. These are things that big chains and small independents can easily get wrong, which we’ll cover in more depth in the section on Survival Essentials.
If you don’t believe there is a future for physical stores, take a look at Seoul in South Korea, where some of the most successful retailers have taken in-store experience to a new
level. Stylenanda Pink Hotel & Pink Pool Café in the Myeongdong district of Seoul is one of the world’s most instagrammable stores. Contrary to its name, this isn’t a hotel, it’s a fashion and make-up store but the theme is taken to the extreme with each floor having its own unique style and personality. Gen Zedders are in their element in this quirky retail landscape set around a lobby, laundry, hotel bedrooms and Pink Pool Café. Another great example of retail 2020 is the Olive Young flagship store in the same district. It relaunched at the end of 2017 after five years of trading. During those first five years, the brand über-analysed its customers to create a store just for them. That may sound like an obvious thing but it’s surprising how many retailers forget the fundamental principle of getting to know the customer and giving them what they want. Olive Young’s beauty and make-up emporium features huge mirrors and allows customers to try product freely and experiment to their heart’s content.
We can easily identify some retail survivors who have already done what’s needed to escape the apocalypse. So, what are they doing that everyone else isn’t?
John Lewis is a prime example of a retailer that continues to woo its customers and attract new ones. Looking back at the Kahn Retailing Success Matrix, the business is excellent at three of the four pillars: Brand, experience and frictionless. Their own brand products are reliable and of consistently high quality so customers feel safe and secure buying from them. Their online and distribution channels are frictionless and they prioritise customer service so it’s a nice place to shop, whether you’re in store or online. Most importantly, they are offering things that
consumers can’t easily find elsewhere. They have focused on developing a strong own-brand product range that eliminates the potential for like for like competition on price and they have gone out of their way to excel at sourcing. We have worked closely with John Lewis for a number of years to help them source newness and variety. One of our most exciting collaborations with John Lewis has been to support their Locally Made initiative which introduces locally-sourced products to regional stores.
No conversation about retail survivors would be complete without a mention for Amazon, whose seamless distribution and delivery system has driven consumer expectations through the roof. They are also often unbeatable on price. The fact that they do both of these things better than almost anyone else means they are unlikely to relinquish their position on the retail leader board any time soon.
We have come across a lot of truly excellent small independent retailers around the country that excel at both experience and brand. Having taken time to get to know their customers really well, they are at ease with them in store which also helps to create a frictionless buying environment. One of our roles at The Great British Exchange is to help retailers differentiate themselves from competition and, within the independent sector in particular, we have found the following strategies to be most effective:
• Sourcing British-made products.
• Retelling the story behind the brand, maker or designer.
• Stocking goods made within a defined radius of the store to reduce carbon footprint.
• Focusing on varied and innovative products.
• Identifying new and emerging brands.
What Bad Retail Looks Like
At the risk of labouring the apocalypse metaphor, too many shops are like zombies, following each other to stock the things they know customers will buy because those are the things customers have always bought.
The problem is that customers have changed. They can sniff out weak, rotting retail and they run in the opposite direction. What’s more, they can go online and find that generic gift 10% cheaper. Offer them something that isn’t easy to find elsewhere and they’ll pay more for it because it’s a far more special gift. They’ll probably even buy one for themselves too, then they’ll come back and see what else is new.
How do you know if you’re doing it well? If you’re sitting behind your shop counter flicking through a product catalogue, you’re failing. Good retailers are busy serving customers.
In order to survive the current apocalypse, retailers need to excel in at least two of the four pillars mentioned in the Kahn Retailing Success Matrix.
Here we’ll set out simple things every retailer can do, whether they are running a small seaside gift shop or a chain department store with a branch in every town.
- Brand. Offer something different. If your customer can get it down the road or online they have no reason to come to you. Source products specifically on newness, variety, sustainability and uniqueness to give consumers greater choice on quality and selection.
- Price. Most retail survivors choose not to compete on price. If you have got things right for the brand pillar, you should be able to charge more for your products and make a decent living, rather than just scraping by. Remember that today’s consumer is highly value-conscious and doesn’t like to be ripped off so make sure you are telling the story of each brand to make it super clear why your products are worth their price tag.
- Experience. This is something every retailer can get right, even on the tightest budget. One of the most successful ways we’ve found of livening up an average retail experience is to host Meet The Maker events. Most of the producers we source from enjoy being part of live in-store events and demonstrating their craft. Not only does this give stores an opportunity to boost footfall, it also sets them apart as a destination rather than just another shop. If you’re a small rural gift shop that’s hosting a gin tasting event with a local distillery imagine how many extra customers you’ll get through the door that day – and how many will leave with a bottle of gin.
- Connection. As well as creating theatre in-store through events and exciting displays, you and your team should be making a connection with the people who walk through your door and dedicating yourselves to creating a little oasis where they can learn something, discover something, imagine themselves doing or having something new. Offer a cup of tea on a cold day or a glass of iced lemonade on a hot one. Provide tasters of local produce and share the story behind the product. Just go the extra mile and give people a reason to remember you. Connecting isn’t just about being nice to your customers. Each visitor to your store is a valuable source of data. By talking to them, you can get to know your customer and shape your retail experience accordingly. What do they want to see in the store that they are not seeing at the moment? What do they like best and want more of? Are they buying for themselves or for gifts? How much are they willing to spend? Where else do they shop? Finally, think about how you keep that connection going once the customer has left. Is there any way you can keep in touch with them to let them know about future events and new products?
Buying should be so simple that it happens almost without the customer noticing. Think Amazon’s one-click ordering. Think self-checkouts in the supermarket. Saying that, “frictionless” doesn’t have to mean investing in iPads in store or expensive ecommerce websites. It can be something as simple as clear price tags on products, easy to understand deals in store and people on hand to answer questions and take payment without making the customer wait. Consider opening hours too and whether they are making the most of your customer behaviour bearing in mind modern-day living. Review all these areas frequently because your customer is changing and you need to keep pace.
How can you, as a retailer, know what customers are going to want to buy in 3 or 6 months’ time? This is a real challenge, particularly for smaller retailers, and is one reason why so many default to buying the bestsellers in an agent’s catalogue rather than questioning what will give them the best return in their locality or market. It’s worth re-iterating there is simply no point in stocking popular items that a customer can buy down the road for a similar price. Sure, you can have some popular lines but make sure visitors see a definite difference when they walk through your door and find exciting and unusual products that they can’t see anywhere else.
One of our key roles at The Great British Exchange is to spot trends and source hot up-and-coming British brands for retailers who are looking to differentiate themselves. One way we do this is by working with regional retailers to find great local brands that lie within a specific diameter of their door. Not only is this more interesting, it’s also more sustainable. We can also give them exclusivity on some of the most exciting new products from British makers. Our sourcing team keeps our network of retailers updated on trends and bestsellers on a regular basis and helps them with their own events and campaigns.
Speed Read: Have a Survivalist Mind-set
- Think about the story behind the products you sell and start a conversation. This means getting to know your producers and talking to your customers about the brands in store.
- Offer things to do, as well as things to buy. Meet The Maker events give people a reason to come in and help them create an emotional connection to your store and your producers.
- See your customer as a resource – find out what they like and what else they’re buying and listen carefully to what they tell you.
- Make buying easy – clear pricing, outstanding customer service and ultimate convenience.
- Be first – spot upcoming brands before anyone else and don’t be afraid to showcase them in-store. Become a destination for newness.
- Be different – if your sole purpose is to stock what everyone else stocks because it sells, you might as well give up now.
- Be busy – if you are not busy serving customers then something isn’t right. Question everything you are doing until you eliminate all the barriers to sale.
How The Great British Exchange Can Help
Here at The GBE we care deeply about retail and we work tirelessly with retailers who have a survival mind-set to make them more profitable and sustainable. We do that by sourcing products that will sell well for them, advising them on purchasing strategy and in-store merchandising and creating in-store theatre and Meet The Maker events. Our sourcing specialists pre-vet brands so that retailers can trust the products they are buying and discover more about the maker and the provenance of the range.
We work with some outstanding and talented producers, many of whom we have helped build up from kitchen table businesses to product lines in national retail chains. Our unique position between retailer and producer allows us to drive innovation in stores and support retailers who have a strong survival instinct. Our experienced retail sourcing specialists are always happy to have a conversation about how The GBE can help you.
To find out more, contact us on 01423 229988 or firstname.lastname@example.org
Download a copy of the White Paper: The Great British Exchange White Paper – How to Survive this Retail Apocalypse