COVID-19 prompted a fresh wave of proclamations that “retail is dead” and “physical stores are finished”, and whilst it is inevitable that the acceleration of digital adoption will lead to a sharp rise in the penetration of e-commerce and a corresponding contraction in the number of shops in the UK, I believe it is important to take a broader, more balanced perspective on the topic. Retail is changing but it certainly isn’t dead, and with change comes opportunity.
History shows that the retail industry has been adept at meeting new and changing shopper needs and I do not expect the post-COVID era to be any different. As an example, over the past 15 years, the retail industry has grown by 55% in the UK to £450bn sales per year and there has only been one year of decline over that period of time. As we look ahead to the next 15 years, our focus at Barrows is on understanding how shoppers’ needs and behaviour is evolving, to inform our thinking on the retail concepts of the future.
We anticipate the trend of increasingly polarised shopper missions to continue as shoppers look for more convenient ways to buy low-consideration items yet, for high-consideration items, conversely invest more time on browsing and research across an increasingly complicated shopper journey. In this context we see two specific missions gaining prominence in the way that retail formats evolve; buy for now and the browsing/research mission.
The buy for now mission >> the next wave of frictionless
The frictionless experience offered by E-commerce is undeniable but it is not always the most convenient way to shop and I expect physical retailers to continue to exploit this fact by developing new formats to deliver for immediacy. As a result, we anticipate that manless formats and nodes will become mainstream, as they offer the benefit of 24-hour convenience at a relatively low-cost operating model.
We also believe there is likely to be a rapid adoption of smart, mobile and adaptable ‘pop-ups’. At Barrows, we are proud to have developed a major breakthrough with our own Agile Retail format which we launched in 2019, enabling participating partners to host data-smart, hyper-localised, dynamic and truly agile activations in previously untapped high-footfall locations.
We expect there to be substantial investment and improvement in enhancing convenience stores to make the process of picking up food to go or completing a distress mission as fast and pain-free as possible. Amazon’s development of new palm scanning technology is yet further evidence of what is to come.
Browsing and research mission >> immersion and human enhanced
For high consideration purchases, post-COVID shoppers will continue to use physical stores for research and inspiration as part of the purchase journey. In response, retailers will continue to turn up the dial on experiential, creating more informative, expressive and immersive shopping experiences. We believe that this investment will be enabled by a reset in store economics, with retailers able to access significant cost savings through rent renegotiations. NEXT boss, Lord Wolfson, recently stated that NEXT has reduced rents by 50% on average so far this year and expects to shave £9.9m a year off its rent bill this year.
Behind-the-scenes automated technologies will continue to reduce the time store staff spend on manual and low value tasks. In stark contrast to the innovation in the convenience sector, the retailers that reallocate staff time to serving customers, creating human-enhanced shopping experiences, will disproportionately win. We are social creatures and the value of human expertise and personality will always be important.
The growth of services >> multi-purpose formats
Beyond browsing and research, the success of Pets at Home highlights the opportunity for those that evolve beyond simply using stores to sell products. Last year, Pets at Home CEO Peter Pritchard announced they expected 50% of revenue to come through pet services by 2024. By focusing on services that e-commerce retailers can’t provide, retailers can drive repeat foot traffic to their stores, giving customers a valuable reason to visit beyond fulfilment. This trend is also on the rise in fashion, as more and more brands offer their customers the opportunity to repair and upcycle old garments in-store, bringing customers to store, creating new revenue streams and helping protect the environment by shifting to more circular business models.
Circularity is the principle that used or discarded products serve as raw materials for new products or materials, meaning nothing ends up as waste in landfill. Globally, retailers are increasingly taking responsibility for their environmental impact, committing to serious goals – Sainsbury’s has pledged to spend £1bn to become Carbon Neutral by 2040 – and as they inevitably shift toward circular thinking, the impact on the store experience will be profound.
IKEA’s recently announced Black Friday scheme to buy back unwanted furniture on a day designed to promote excess consumerism is a fantastic example of how retailers are starting to adapt the way they think about ‘value’ to move towards more circular models. We believe that circularity will encompass the entire store format from store design through to product design.
At Barrows, we are also helping retailers respond to these challenges by launching PolyAl, the very first temporary promotional display fit for a circular economy. The unit reduces wastage by converting non-recyclable ‘waste’ into a permanent upcycled core structure that can be recladded with new campaigns or messages. PolyAl requires up to 90% less corrugated board than traditional temporary displays and offers brands up to a 20% cost saving.
Retail is undoubtedly going through a period of rapid change and, at Barrows, we believe that whilst this presents challenges, it also presents huge opportunities. In the face of endless change, one core truth remains consistent; the retailers that are best able to identify and meet the evolving needs of their shoppers will succeed. Encouragingly, brands and retailers are also starting to incorporate the full impact they have on the planet as part of the value equation. This may well be the catalyst for an even bigger change in the future of retail formats.