Retail Sector Blueprint For Survival: How?
It’s time to break the fourth wall of the retail pantomime. Start talking to the real consumer audience watching, listening and waiting in the other room. “Behind you!”
Jan 2020. Going, going…Mothercare 150 stores at peak, loss of 2500 jobs; Beales 23 outlets, 1050 people; Carphone Warehouse 531 stores, 3000 people; Cath Kidston 60 stores, 900 jobs; TM Lewin, 66 stores, 600 jobs (now online only); Oasis & Warehouse group, 1800 jobs, 92 shops, 437 dept. stores concessions; Oliver Sweeney, 5 stores, online only; Evans, 100 concessions, 5 stores; DW Sports gone (73 gyms re-branded, Everlast Fitness, 900 jobs saved); J Crew; Brighthouse 240 stores 2400 jobs; Debenhams…Arcadia Group, agg,25,000 jobs. Dec 2020. GONE.
These UK retail casualties household names tell you the last retail horse has bolted, taking the Juki machine kept for alterations with it. Some retailers left with online only or their international retail business intact, so far.
The economic global catastrophe stemming from the pandemic has hit retail the hardest, particularly traditional fashion retail stores, open only 36% of last year. Not being able to trade fully with restricted footfall is disastrous. Covid has compounded the stark realities of an industry progressively out of sync with the market. In truth, it has been this way for a long time: e-commerce is bleeding bricks and mortar retailer revenue streams dry. Covid merely accelerated the demise past the critical point propelling many consumers to adopt new, (never going back?), online buying preferences. You are either finessing e-commerce as an integral, growing part of your brand positioning as a retailer. Or you are dying. No sentimentality in-between.
Squeezing the last drop of architectonic financial misery out is the chilling reckoner of a cash-strapped furloughed consumer market. Is a revised survival blueprint channelled through the experiential wisdom of recession-pummelled retailers even possible? I would argue a different kind of wisdom is required. One that understands operating across omni-channel platforms, integrating new technology and nimbly deploying social media marketing as the norm. Are you that guy?
The retail culling we witnessed in 2020 is not over. We will see another set of established brands disappear from the high street by the summer. Many traditional retailers able to maintain an online presence, who managed to limp through last year, may still be unable to change their financial gearing sufficiently to survive – too much overhead cost to dissolve. A percentage will have transformed into online only, some absorbed by other brands and the rest added to a growing list we won’t see again. Statistics that bear out the second law of thermodynamics – all systems will eventually die unless renewed by fresh inputs. The retail industry did not have enough ‘requisite variety’ to respond to e-commerce’s exponential growth and behavioural impact. Covid currently, will force the rest to adapt or go under.
Much of the retail pain being experienced is relative. Relative to inviolable economic determinants. Ask battle-worn retailers about the 3Ps of Product, Place and Price. There’s 4,5, 6 and 7 ideally, if the period of trading extends the conversation that far. ‘Platform’ has to be in there, only now it’s multi-platform and virtual.
As an integral part of the global fashion industry, traditional retail has systemic problems embedded within its modus operandi: a hostage to fortune, subjected to random consumer buying behaviour; endemic profligate waste and unsustainable commercial viability, compromised by e-commerce. Mobile ecommerce now represents a staggering 56% of all online purchases. ASOS is up 37% in the last quarter, Primark down 30%. Go figure.
A paradigm shift is needed if retail is to survive. It requires a repositioned, multi-dimensional, online-optimised consumer-facing strategy, supported by re-investment in the UK manufacturing base and supply chain.
What about the small indies retailers? What the f-expletive are they going to do?
There are some positive caveats for the smaller retailers being derailed by stop-start non-essential Covid closures. A chance to experiment, seize the opportunity and be the architects of their own survival. Many consumers deliberately supported their local stores during lockdown reprieves, evidencing a humanistic community spirit. We actually do care it seems. On ‘Small Business Saturday’ in December, 15.4 million people spent over £1billion. I would venture retailers need this engagement most Saturday’s and during the week to survive. But retailers need to change what they do to secure this. It is not remotely guaranteed.
Ironically, enforced lockdown closures will have impelled many smaller retailers towards ecommerce for the first time, and may be the one thing that helps them to survive, short term. Jury is still out on longer term. The perceived slow burn of losing retail sales to e-commerce, as an ‘invisible’ competitor, or those in dinosaur denial will have been unceremoniously rug-pulled by Covid for a much overdue wake up call. It’s about bleeding time.
Being small has advantages. An indie can adapt far easier than the big retail chains now disappearing under the weight of their own cost burdens. Time and statistics will show who survived and the business model they adopted. Like as hell as not, they are already on this path. Covid may be the catalyst for retailers to try new ways of courting the consumer. One can intuit it’s a revised retail blueprint heavily weighted towards online, with a far more customer engaging, multi-platform ethos.
Retailers will have to work harder to generate sales and entice the customer into the store as ‘online portal’ and physical floorboards. The retail mind shift required perhaps is to regard the store consciously as an ‘experiential’ showroom (vis Cath Kidson’s Piccadilly store) in harmony with and in support of an online presence, with orchestrated ‘live’ sales events punctuating personalised customer engagement, driven by social media marketing. A business dynamic aptly suited to the leaner Pop Up store model incidentally.
We all want to see the character and identity of our High St community maintained by interesting, independent retail stores but they have to be relevant for that community and meaningfully engaged with it. Yet, by definition this also now requires the challenge of catering to a different virtual audience you may never see, cultivated on many platforms and a moveable feast. Increasingly, this will be influenced by the degrees to which the retailer is offering a complete, seamless, frictionless in-store experience, that includes 5G enhanced digital payments (this year,) ‘scan and go’ mobile checkouts for immediacy and convenience, and the extent to which the walk-in customer expects it. Add AR (augmented reality), including product visualisation and virtual try-ons, branded social filters and (interactive) digital shop fronts and the in-store experience provides a future proofed customer-focused sales-optimising raison d’etre.
Maybe. Retail in this guise becomes a technologically enabled convenience store to augment seamless purchasing, whatever the product happens to be. But it still needs to be fun, with ‘discoverability’ as an enticement and great interior garment presentation. I have yet to see a better example of retail excellence than Milan’s Fashion District boutiques where layout and the art of seduction join forces to happily separate an over-stimulated fashion buyer from the contents of their wallet.
The paradigm shift for retail as it transitions technology drivers throughout its supply chain, encounters many residual cost burdens. Brand Outlet on eBay UK was launched in response to high demand from big brands trying to sell stock from previous collections, warehoused and static because of Covid and e-commerce. A main reason why a lot of retailers will not be taking new collections for a while, with obvious negative knock-on impact to designers this year. The Direct to consumer (DTC) market grew to £96bn this year, with 57% of consumers buying direct from manufacturers, by-passing retail completely (source Charged Retail Dec 21st 2020). With these numbers set to increase, doing nothing isn’t an option. The bricks and mortar retailer is no longer the primary distribution channel.
Seasonal syndrome merry-go-round meltdown
Designer’s collections traditionally follow the seasons in an un-balanced bank account merry-go-round that’s hard to jump off, once religiously on-boarded. On the same carousel, feeling sick, retailers are compelled to feed the same beast and (be seen to) change window displays from cash drawn from a deeper overdraft well. Impossible to change nature’s seasons, but some radical shift is required not to perpetuate one of the deep-rooted flaws that defies a sustainable operating ethos: buying more, before selling what you have. Who will support all-purpose, all-seasonal designs, with leaner stock holding and just-in-time manufacturing as a remedy? Any takers? This is a complex problem at the heart of fashion’s endemic production supply mismatch conundrum.
Other problems exist for rookie or stalwart retailer and underpin the 24/7 management of the business in transition to e-commerce or otherwise: Cashflow Management. Where net accumulated business acumen skills declare themselves fit for purpose. Or AWOL. Where your past catches up, overtakes blind faith optimism and gets to the till before you, with a forget-me-not monthly promissory debt love-note. Under-capitalised (start-up) retailers, without cash flow from footfall sales can barely last a few quarters. Even for an established retail business, the tightrope financing balancing act has so little latitude as we discovered this year, it doesn’t take much to bring them down. Common sense must be screaming new (online) revenue streams by now??
Retailers will have to re-justify their High St outlet costs in the face of the combined onslaught of e-commerce and Covid, putting aside vanity for better business practice. You don’t just go back to how it was before. Consumer buying behaviour changed. Perversely almost, in the midst of a retail graveyard, this can be good for retail because what survives will be stronger, in tune with the market as the de-facto model shaping future retail.
Retailers can embrace the ‘rotating-pop-up’ as an alternative model. No start-up and even long-term brands should saddle themselves with the fixed cost of rent and annual leases. Not until or unless they are established, with a customer base and can leverage economies of scale. They need to be lean and totally cost conscious. And ask themselves, if it can be done better, cheaper and more efficiently online. You have to wonder, is a retail outlet simply an ego overhead out of control?
The pop-up needs to embrace a much higher weighting towards social media marketing by channelling footfall to specific staged sales events in the store. If the pop-up is shared, there may be collective by-association marketing benefits. If the site is in a well-known location for Pop Ups’ consumers may support the fresher, dynamic retail engagement. But, with Pop Ups, you have not gone into so much debt to gain experience or develop brand positioning you can never recover from. Or your confidence crushed for good as a result.
It’s hard to imagine how, when the retail market readjusts pre and post pandemic, the Pop-Up sector is not poised to deliver a better risk-mitigated cost model. Low-key, retail-lite guerrilla tactics for the modern, urban Pop Up retailer.
Leaders or Followers?
Fashion is now also the domain of the mystical Follower gurus, if you are able to fund ones that count. Two self-styled mid 40s fashionistas quoted in the Times Magazine supplement, (9th Jan 2021), spring-boarded from boutique to online style leaders, generating commission revenues from followers buying what they model. Age clearly does not wither them. There are thousands of these statistically warping social media head turners out there, but never enough to go round it seems. This model is not guaranteed of course, or will suit everyone managing his or her retail business. The point now is every retailer needs deft social media skills, combined with the same exacting rules regarding the 3Ps and more.
This elephant hasn’t left the room. Where does the footfall fall? I recall a talk at Pure from what was the by-the-numbers suit and shirt High Street retail chain people, TM Lewin. It was an object lesson in location research before opening and committing to a new store site. Days, weeks and months spent not just counting footfall, busy times and busiest days, but analysing the customer profile by what they wore. Did they fit their target demographic for their designs? TM Lewin had an incredible business with a 100-year legacy and considered a progressive retailer, introducing shrewd in-store marketing for multiple purchases. But even they are on the casualty list. Notwithstanding their brand positioning achieved directly through traditional retail excellence (£100m turnover), it wasn’t only that they could not transition fast enough to avoid Covid closures – they had nowhere else to go in their business model to survive as retailers, other than online. This point is really fundamental: retail in the future may essentially become a receptor funnel for online transactions.
There’s an argument for high-end specialist tailoring as the retail exception for necessitating physical engagement. And even that is challenged right now, and possibly by sensor–based AR technology ‘best-fit’ in the future. I hope not for Savile Row’s sake. And for designers to learn the craft of tailoring, not outsourcing. RIP Alexander McQueen. (Under-graduates are you listening?)
National manufacturing empowering retail renaissance
For retail to work, the ‘infrastructure’ thinking has to be in sync with the medium to longer-term post Covid, post Brexit macro manufacturing decisions still to be made. The pandemic brought into sharp relief our over-dependency on overseas supply chains, principally Chinese. Factories (and ipso facto, the fashion industry) could not function because raw materials were stuck on immobilised ships and ports for fear of infection transmission.
With the shackles of Brexit finally falling, imagine if the UK (including a tariff-friendly non-paperwork paralysing EU relationship) took this on board to invest in local manufacturing and supply. The fashion industry in the UK could service more of the community in the broadest sense, in sync with the manufacturing supply chain in a direct, commercially re-imagined way. Hopefully in a viable way to recapture some of the overseas market share. Reading labels would have an immediate, conscious context because the source is the same place we buy the clothing. Quality in production, finishing, tailoring and fabric would be a discernible differentiator in value and made in the UK. Training becomes a critical enabler to achieve re-aligned quality engagement.
Recalibrate for quality as intrinsic value of fashion retail
I have a lot of empathy with a fashion industry aesthetic based on quality. If we are to stand a chance of re-calibrating mind-sets towards greater awareness of fashion, it has to be based on its intrinsic value. To understand in a fundamental way the sensory relationship we have with fabric texture touching our skin and make purchasing decisions because of a tactile, sentient awareness. And to appreciate the skill, technique, application, labour and passion of the many hands involved. As fashion consumers we can invest in product knowledge and design willingly too. And help directly in re-shaping and re-purposing a retail sector that makes fashion more relevant, insightful and in-tune with market needs.
Within this spirit, a new retail vanguard can emerge. One whose starting point is more meaningfully sustainable and pro-actively integrated with technologically aligned consumer-focused demand. Served by an intelligent, reflexive, fashion-industry supply model. Time to invest in our own industry. And still time to save retail. But not as we know it now, Jim.
P.S. Retail Lifeline? As this was going to press, “…Tens of thousands of small businesses will receive insurance payouts covering losses from the first national lockdown, following a Supreme Court ruling.” (BBC News, 15th Jan)
By Paul Markevicius