The State of UK Retail
We have been reading a lot of stories about the current face of the UK retail market. Amidst speculation and concerns about the changing character of post-recession high streets, data published recently has helped disambiguate the situation. Last week, The Local Data Company’s report “Too Many Shops” identified the following shifts in the UK retail sector:
• A decade of lost growth as consumer spending is back to 2002 levels.
• 13% of retail transactions in the UK occur online. By the late 2010s, 50% of transactions are expected to occur on mobile devices and VISA’s online platform.
• High Street footfall is down 5% nationally.
Clearly consumer spending is down and already moving from offline to online spending. In the long-term, the proliferation and popularity of mobile devices brings with it the desire to transact in every way possible on the platform. In the short-term, brick-and-mortar retailers have been put under pressure from online purchasing. Without any model currently in place to mitigate this shift, the type of spending correlates directly to where it is spent. For the moment, online sales does mean sales made outside of physical shop space.
• 1,500 shops per year closed between 2000 – 2009.
• 5,000 shops closed each year in 2010 and 20011.
• 1 in 7 UK shops has fallen vacant.
This sharp rise in shop closures is most commonly attributed to both decreased footfall (and related spending), and consumer consolidation (as more people go to fewer shops). Traditional department stores are being overlooked in favor of independent intermediaries and innovative brand stores. Primary examples like the Apple Store and Niketown have found renewed success through well-crafted and heavily designed shops. We see the most success in retail shops that are highly engineered and driven by experiential retail concepts.
• 52% of retail leases expire between now and 2015.
• 6.6 million square feet of new space has been added from 2005 – 2012.
• There are currently 50,000 vacant shops in the UK.
As more space opens up on the property market, consumer patterns change. But shops have trouble changing with them. Long-term leases mean that most shops cannot flex to match the flux. With so little room for competition, pricing adaptation, and innovative strategy, we can expect that retailer mobility will also be on the rise. With half of long-term leases expiring soon there is a good chance that the markets going to be on the move. (Additional information on UK and European retail shifts are available from Matthew Hopkinson’s presentation Multichannel Stat Attack from the Mobile Retail Summit 2012).
Pop-up shops are part of the solution”, said Simon Danczuk MP.
New consumer expectations are driving the rise of short-term “pop-up” retail in the UK and internationally. Made clear by high-fashion and Big Brand shops, consumers desire to associate themselves with products and brands in a more meaningful and creative way. The “pop-up” model facilitates innovative, specialized and (most of all) personalized shopping experiences for a new generation of shoppers.
For retailers, running a pop-up de-risks many common brick-and-mortar challenges. Without the pressure of a long-term lease and deep financial investment, they can offer a wider variety of stock, test prices and iterate designs faster. (Another way to say it is that short-term engagements allow the market to correctly price retail property, but that is a conversation for another time.