Death of the High Street - a Rebirth Opportunity for Suppliers?
By Brian Moore, Global Retail Consultant and CEO of EMR-NAMNEWS

It is obvious that fundamental and possibly irreversible change is taking place in the High Street.  The recession has simply accelerated the process of custom moving out of town and online, at the expense of High Street locations.

Businesses that were already ‘on the brink’ have been pushed over the edge by a combination of reduced demand, and increased rentals driven higher by empty shop taxes.  This exodus is resulting in degeneration of existing retail stock and most parties accept that there will be no going back to ‘normal’.

With a national vacancy-average of 12% of available space, this increasing level of over-capacity will need to be corrected by local Government via change of use to new retail models or residential accommodation, or more benign planning legislation, in order to prevent further degeneration.  Thus the High Street will survive, but not as we know it…

Cause and effect are well documented elsewhere, but it is perhaps more important to explore the impact upon suppliers and the changes they need to make, in order to optimise what will remain of retailing in the High Street.

This fundamental and inevitable shift to out-of-town and online retailing means that older, less mobile consumers will suffer, as will brands that require constant 100% distribution and availability.  Moreover, empty shops will be a constant reminder of the need for recessionary cut-backs for those consumers that are tempted to re-enter the market as shoppers.

The future High Street will embrace a mix of convenience and food-to-go, under price-pressure from additional hard-discounters, in combination with non-foods, alcoholic beverages, home entertainment and financial services, all under constant threat from out-of-town and online experts.  Of necessity, surviving retailers will be those that have raised their game to compete successfully in the new market environment.

Recession in the High Street represents opportunities for the hard and soft discounters to enlarge their footprint, with the blessing and even gratitude of local Government.  Moreover, as the major multiples continue to diversify in terms of offering and format, so too will the High Street represent low rental expansion opportunities, with the added benefit of little opposition from town planners.

In the meantime, shops will survive by neutralising the impact of empty retail shells, and optimising their offerings for the shoppers that remain, at prices that just about prevent drift to out-of-town alternatives.  This delicate balance means that suppliers need to reassess the appeal of the remaining shops, from the perspective of the brand’s consumer profile in a new High Street environment.

All of this represents a dilemma for suppliers.  They will need to choose between trying to slow down the inevitable drift of business from High Street to out-of town, or accelerate that decline via a focus upon out-of-town and online opportunities…

Moreover, suppliers will have to ensure that any loss of High Street business transfers fully to out-of-town or online channels, by actively promoting at each end in order to avoid any loss in transmission…

On balance, suppliers have to optimise business in the new High Street, whilst developing expertise to match the increasing power of out-of-town customers arising from increased trade concentration, and the resulting growth of own label.

In practice, the supplier needs to conduct a fundamental review of the entire market, re-audit all routes to consumer, and re-assess the appeal of their offering vs. available competition, by category, by channel, from the perspectives of different consumer profiles for its brands.  In other words, a return to basics.

Finally, because of the risks involved in undergoing unprecedented change of this nature, it is imperative that suppliers apply normal trade investment disciplines whereby a supplier making a 10% net profit, needs incremental sales of £100k for every £10k invested in the trade.  Incremental sales of less than £100k simply mean that overall profit is being diluted, adding to corporate risk.

In other words, if you cannot make the numbers work, it is perhaps safer to leave the role of High Street midwife to others more qualified to manage its rebirth.

For KamTips on 'Optimising The Potential Of The New High Street…' see Namnews – August 2009

Date article published: August 2009