What’s Happening On The High Street

© Neil Halford 6th August 2009

Trouble on The High Street

• The high street in the UK is, in my opinion, in big trouble.

• Dieter Helm sums it all up quite nicely for me.

Trouble on The High Street

• As Dieter Helm, Professor of Energy Policy at the University of Oxford, has put it, 'The fundamental cause of the current crisis is that consumption has been unsustainably high, based on borrowing too much, investing too little and saving too little. If we continue to try to spend even more, and borrow ever greater sums, the eventual effect on the standard of living will be commensurately greater.’

• Helm reckons that sustainable consumption in Britain 'may be as much as 20 per cent lower than at the peak in 2006-07’

• Source: Daily Telegraph

Trouble on The High Street

• Estimates of vacant shops vary, Experian has Loughborough with 22% vacancy rate and Leicester at 26%.

• The evidence of our own eyes is enough to convince me that 20% is roughly where it’s at.

Trouble on The High Street

Reports this week in the press have vacancy rates in some towns and cities as high as 25%.

• Source: The Times February 27th 2009

Retail Think Tank Report

• A new report from The Retail Think Tank says that there is still a shortage of primary retail space. They claim that the recession is not the primary cause of store closures but long term trends are much more to blame:

• Shopper habits have been changing gradually• Primary retail sites have been built-on and improved• Consumers are shopping for choice and value and are today very mobile. • Forty years ago a retail chain like would have to have 200 stores across the UK to reach 50%

of shoppers, today that number has shrunk to 85.• Large amounts of tertiary, and some significant numbers of secondary sites are, or will

become vacant in the next few months.• In the same way that primary retail sites are increasingly popular for retailers, they are with

shoppers, and some towns risk becoming tertiary towns, relegated to being a mish-mash of obsolete stores, charity shops & low value retailers Whilst primary sites grow.

• The RTT is encouraging local authorities to review policy and consider a change of use for obsolete retail property. Effectively shrinking the retail stock to provide a more concentrated, highest possible quality. Certainly there is no mention at all of retail returning to the heady days of 2 years ago and no possible need for expansion of secondary or tertiary retail space, just more contraction.

• The RTT is encouraging local authorities of these tertiary towns to rethink how shops and shopping centres could be used in future and address the associated planning issues.

• So, there are now too many shops because we’re all spending less and it won’t go back to how it was 2 or 3 years ago before the easy flow of credit was cut off.

• But I also think that the online shopping is causing, and will increasingly cause more store closures.

The Retail Think Tank

• “So while the recessionary environment is clearly accelerating closures, it is problems of obsolescence and vacancies in tertiary/poor secondary sites which are set to increase markedly.  In the future the “high street” will be less synonymous with retailing and a shake out of poor quality retail property is potentially a positive change, raising the overall quality of retail locations.  However the RTT believes that many more locations are at risk of unnecessarily becoming “tertiary towns” and local government intervention is required to encourage the right mix, landlord flexibility, parking and other facilities in these “at risk” locations to ensure they are not in this category.  For those locations where it is already too late and futile to attempt to revive the retail offer, local authorities must grab the bull by the horns and re-zone. “

• Source: RTT June 2009

10. The Web and Retailing

• In 2002 online sales accounted for 2% of total UK retail spend• December 2008 – internet sales surged by 26% in October 2008• In November 2008, total UK Retail Sales fell by 0.4%, the first fall

for 13 years• Total UK Retail Sales are currently around £270bn• UK Office for National Statistics reported Internet Sales in

November 2008 were 3.8% of all Retail Sales.• EMarketer predicts 2009 Internet Sales will be £68.4bn including

travel, tickets for events and digital download sales• That’s the equivalent of 25% of total UK Retail Sales!• By 2012 EMarketer predicts Internet Sales of £94.2bn (equivalent

of over 30% of total UK retail sales), and average annual expenditure of Internet shoppers of £2,926 each

• The Centre for Economics and Business Research (CEBR) predicts that by 2020 nearly 40% of all retail sales will be online

The Web & Retailing

• In my opinion, discretionary spending is migrating away from the High Street to the Internet.

• I believe that the economic climate has forced change on how we shop, led to the demise of some borderline retail businesses and highlighted just how flaky retail space has become in the real economy. In the coming years we will see the number of financial retail outlets reduce quite quickly because of consolidation and profit drivers, already Lloyds Banking Group has announced the closure of C&G and other branch closures, Santander’s decision to rebrand A&L, Abbey and B&B will be the first step in a major consolidation process.

• For some years I have been telling clients that High Street discretionary expenditure was being channelled more and more away from stuff to things like travel, entertainment, eating out, software, digital media, financial products and other items not reliant on the High Street.

• The threshold shifted for me when two years ago in the USA, paid for media exceeded free media (paid for by advertising) for the first time because it told me that the population had changed it’s perception of where value was.

• The greatest challenge for retail today is how to grow a truly multi-channel offering to consumers that will embrace a growing trend to online browsing, research and transactions. I believe that High Street’s increasing role is to provide experience whilst accepting lower levels of browsing, research and transactions at the store.

• Here are some questions you may be asking your self.• Is it realistic that we’ll spend 40% on the Internet?

Home Retail Group (HRG) Latest Quarterly Results June 12th

2009

• Multi-channel now accounts for 42% of sales at Argos • Argos' multi-channel sales continue to grow in

popularity, Home Retail Group has reported, accounting for 42% of sales in the last quarter, up from 26% in the year to end February

• In its latest quarterly trading statement, Home Retail Group has reported total sales at Argos up by 0.9% to £937m.

• Multi-channel sales accounted for 42% of total Argos sales and, within this, online Check & Reserve grew by 45%.

• This amounts to significant growth in the last three months. In its financial year to the end of February, Home Retail Group reported that Check & Reserve accounted for 17% of sales and that the internet was responsible for 26% of the company's sales.

Other providers are improving delivery services.

Boots Click to Collect launched

Drop & Collect

DHL Servicepoint

Shopping Clubs

And new retail types are appearing on-line. Shopping Clubs are huge in

Germany.

Private Outlet

Web 3.0

• Web 3 is on the horizon & promises:– 3D Portals– Avatar representation– Interoperable Profiles (the user interface will be

determined by your personal profile)– MUVE’s (Multi User Virtual Environments) - Virtual

Worlds– Integrated Gaming, Education & Business– All media flows in and out of virtual worlds

Web 3.0

And the Handset will evolve

• The handset is very likely to play a major part in increasing online spend.

• As networks evolve to the new LTE standard and web sites are built for mobiles more and more, the interactivity and capability of the handset will come into it’s own. You’ll be able to take a photo of a barcode and have Google search for the product whilst you’re in the store so you don’t have to pay the retail price.

• it’ll also be your phone, camera, satnav, credit and debit card, • Scenario 1 – driving along and Satnav suggests where to eat,

even offers you money off vouchers?• Scenario 2 – you’re in Currys, looking at a new TV and wonder if

the price on display is good? You take a photo of the barcode with your handheld computer and Google searches for the product and offers you the opportunity to buy it from a list of other retailers, or second-hand from Ebay, or even direct from the Manufacturer for free delivery the next day.

• Scenario 3 – Your handheld is your ID card.• The good news is that all the technology exists for us to do all

these great things now, we the consumer are what’s holding it all back.

Moving beyond “The Phone”

Japan leads the Mobile Internet uptake

That’s all folks

Thanks for looking