The data, which was expertly dissected by LDC’s Lucy Stainton, emphasises that the retail and leisure sectors are seeing great change, at a great pace, with vacancy rates increasing to 11.4% and, continuing on a negative trajectory, with 4,400 unit closures in 6 months.
Those currently riding the crest of the wave are the service industry which cannot be replicated online, like barbers – with 349 male grooming salons opening in H1 alone! Barber shops are easy and cheap to set up (so less need to borrow for expensive fit out), no formal qualifications are required (so labour is cheaper) and the kit can be as simple as a pair of scissors and a razor. Image is key for the Instagram generation and self-re-invention and healthy living are de rigueur. That re-invention also plays into the growth in the health and fitness sector - 50 more health clubs opened to compliment the barbers and beauty salons, though the rise in ice cream shops may counteract the gym bunnies’ hard work!
The key trends of 2018 were the increase in partnerships between retailers through concessions; CVAs; growing brands; and Mergers and Acquisitions.
So what does this all mean for the future of retail? Richard Lim of Retail Economics discussed the impact of artificial intelligence in retail examining how the retail experience has changed since the 1970s, to today and beyond. His prediction is that consumers’ desire for personalisation (often missed online) will in the future be met by in-store chatbots; tills will be replaced by facial recognition payment screens and prices dynamically linked to the customer and live market conditions. He estimates that by 2020 85% of retail transactions will be supported by AI. The current trial by Waitrose and Yale which allows Waitrose delivery drivers to access your home and deliver your groceries whilst you are out is an example of how technology is driving consumer behaviour.
Julian Dailly from Morar HPI spoke of strategy being a game plan for an unpredictable environment and that to grow a business you needed to have three strands to your strategy: innovation (creating something new) like Deliveroo who have contributed to the eat at home culture; extension (building on what you have already) like The Ivy who have capitalised on their brand to expand their business; and rapid reaction (responding quickly to trends) like Costa who expanded quickly to meet the increased demand for coffee. He also spoke of the power of consumer data and how this enables businesses to be creative, resilient and agile.
Finally we heard from Jon Lake of Chopstix. Their mantra is all about keeping it simple. They pride themselves on the fact that they only have 35 different lines in their food and beverage offering. One of the key challenges for the business in its ambition to expand is picking the right site locations – in a fast moving climate a safe site next to an anchor tenant can change overnight (for example if that anchor tenant enters into a CVA) and so data analysis and forecasting is increasingly key to mitigating risk.
The Q&A session highlighted the requirements for smaller retail floorplates and the role of local authorities, landlords and the planning system to facilitate the use of vacant space. Time poor consumers need retail to be an experience and businesses need to be nimble, unique and authentic to survive.
Some fascinating insight and a great event.