In 2018 the role of retail stores is being called into question like never before. As chains across the UK weigh up the costs associated with a sprawling store estate, business continues to boom for online fast fashion players like Boohoo, which saw sales rocket 50% during the first six months of 2018.
These digital businesses keep margins down by avoiding the rents and rates of the high street, putting pressure on retailers with offline stores to up their game with experiences that cannot be replicated online.
One high street business continuing to ramp up the offer at its multi-brand flagship stores is Sports Direct. In July, the self-styled ‘Selfridges of sport’ unveiled a 100,000 sq ft flagship in Thurrock, Essex positioned as an interactive lifestyle destination.
If you look at how much value you can get from interactions, retail is still the champion for us.
Ettienne Brandt, EE
Combining the Sports Direct brand, casual fashion retailer USC and premium fashion retailer Flannels, the store also includes an Everlast gym and a kid’s zone, while there are also plans to add an eSports arena.
Meanwhile, high street stalwart Debenhams has unveiled the blueprint for its stores going forward with the opening of its Watford branch last month.
Described as a “new flagship”, the 86,000 sq ft three-storey outlet is the vision of CEO Sergio Bucher, whose strategy is to make shopping “easy, sociable and fun”. He claims the store will be easier to navigate and cheaper to operate.
Shoppers can try on clothes in changing rooms equipped with mood lighting or visit the Pinkster gin bar, and while there will be 25% fewer products on sale, Debenhams will be curating the offer for local customers, highlighting specific items in the New This Week hub.
The store is also the first in the country to feature Debenhams’ new ‘Beauty Hall of the Future’ concept, an interactive space occupying 15% of the store. Launching with 24 new skincare, make-up, haircare and men’s brands, 20% of the floor in the beauty hall is serviced by Debenhams rather than individual brands.
The space is grouped into zoned areas including the Hair Lab and a dedicated area for travel-size products known as the Minibar. There is also a beauty bar offering manicures, blow dries, lash and brow treatments, as well as makeovers. Elements of the new-look beauty offer will be rolled out to around 40 stores before Christmas.
Customers tell us the right combination for them is a great digital experience combined with the convenience of stores and a great delivery service.
Gary Kibble, Sainsbury’s Argos
Beauty is also high on the agenda for supermarket giant Sainsbury’s, which is introducing department store-style beauty aisles staffed with specialist assistants across 11 of its stores nationwide as it looks to differentiate.
The retailer plans to double the size of its beauty offer to 3,000 products and is introducing two Fragrance Shop concessions at its stores in Croydon and Selly Oak, Birmingham.
While some brands are retreating from the high street the opposite is true of mobile network EE, which aims to have a store within a 20-minute drive of 95% of the UK population.
EE currently has 618 stores, up 15% over the past 18 months and expects to add another 15 stores this year. Rather than thinking in terms of store numbers, the focus is on measuring unique locations.
Managing director of commercial for consumer, Ettienne Brandt, explains that after on-shoring all its call centres, the natural next step for EE is to ensure customers have the option to interact with the brand in their local town or city.
Before embarking on the store growth strategy, EE analysed its store design and decided to shift away from identikit, sales-driven stores of around 600-800 sq ft in favour of five different formats.
Now EE has a range small format stores, mid-mall pop-ups, standard local stores, showcase stores and an EE van to meet consumers out in the community. The showcase stores have been reconfigured with a ‘help hub’ at the front and product at the back to shift the focus from pure sales.
The idea is to create more of a personal interaction by bringing service to the heart of the store, which is crucial as 50% of EE’s in-store footfall is service related. Rather than measuring the trading density, Brandt’s team analyse success in terms of product per interaction. He says the company is likely to sell more products to those customers who come in-store rather than purchase online.
“It will cost me more, but I’ll get more value out of that transaction because I can sell the customer additional products like home broadband or a TV subscription as I can demo it,” he says.
“If you only ever look at one metric, which is your CPA [cost per ad], of course you’re going to go down cheap digital channels, but if you look at how much value you can get from interactions, retail is still the champion for us.”
EE is also keen on collaborating with complementary retailers and brands, a strategy Brandt believes will gain popularity in UK retail going forward.
In August, the company unveiled the first Samsung repair centre inside an EE store at its location in Bluewater, Kent. Open to all Samsung users, regardless of whether they are EE customers, the repair centre is designed to cut down the time it takes to get a phone fixed, while also providing an opportunity to sell additional services.
Furthermore, EE has partnered with Argos and Sainsbury’s to bring its offer into the supermarket environment, a move Brandt sees as enhancing the convenience for customers.
Sainsbury’s Argos marketing director Gary Kibble believes co-locating the brands within a “destination environment” helps to make customers’ lives easier.
Sainsbury’s acquired Argos for £1.4bn in 2016 and there are now 250 Argos stores inside Sainsbury’s supermarkets, which Kibble credits with increasing footfall and boosting sales in the supermarket. The company plans to open a further 280 locations by March 2019.
“Although we are a digitally-led retailer, stores are an integral part of our strategy,” Kibble explains.
“60% of our overall sales now start online, but 80% of our total sales are fulfilled in-store. Customers tell us the right combination for them is a great digital experience combined with the convenience of stores and a great delivery service.”
Anusha Couttigane, principal analyst for fashion EMEA at Kantar Consulting, describes the shift to complementary brands and retailers co-locating their businesses as the “frenemy trend”. She believes that if retailers are willing to join forces to create a unified experience it could have an enormous impact on shoppers.
“If you think about a shopping centre like Westfield, there’s shared services between retailers under one roof. Why could Oxford Street not offer the same service?” she asks.
“Why could somebody who is shopping with one particular retailer on the high street for a party not be recommended to go to another retailer on the high street to create a more holistic solution?”
The new Next store on London’s Oxford Street, opened in September and is an example of retailers sharing space to create a lifestyle destination.
Set up almost like a department store, the space features a Costa Coffee, Lipsy, Dutch discount chain Hema and Paperchase stores, each with their own distinct brand areas set within the wider Next environment. Lipsy even has a separate entrance.
Anything that can increase dwell time is a bonus says Holly Klimek, international retail analyst for cross border retail and leisure at real estate company Cushman & Wakefield, who has seen an increasing number of retailers adding new service lines such as cafés or beauty bars.
“What Next has also done well is aligned the retailers, because I think when retailers create those partnerships it has to be with complementary brands,” Klimek adds. “There’s no point having a Next and putting something super premium in there as that immediately gets rid of any brand alignment.”
Couttigane believes Next will benefit from being able to bring newness to the market through the Hema collaboration. The value Dutch retailer is growing fast and has a young following, but is not well known across the UK, meaning the tie-up could work well for a nationwide roll out.
“If retailers use some of their excess space to give a platform to newer retailers then there’s the USP of having something that others don’t and we’re in the age of globalisation, so brands are travelling more than ever before,” Couttigane adds.
“If you can position yourself as a large format retailer with an exclusive outlet with one of the most popular brands in another part of the world then you’ve got a winning formula.”
While many digital retailers question the relevance of physical retail, others see the value of taking their brand offline. One such retailer is direct-to-consumer premium tights brand Heist, which in September opened its first physical store in Seven Dials, London.
Head of retail Joanna Bell explains that the store offers an opportunity for a brand built online to create a sense of theatre and spend important face-to-face time with consumers in a new environment.
“We do believe that retail needs to be bold, beautiful and experiential. The consumer is very discerning now, so they’ve become tired of outdated retail experiences,” says Bell.
“We also know that we have an audience that is looking at us online but is not buying and we believe that by having the physical presence it will give them the chance to engage with us and crucially touch the product.”
This is where the demo studio comes in. Described by Bell as a “world first in the hosiery industry”, the area allows both female and male customers to try on tights, experience the quality and test the shade to their own skin colour before they buy.
“The key point here is customer engagement,” she explains. “We understand there’s a risk of having people try on the tights, but we’re focused on fixing the single biggest barrier to people becoming lifelong Heist customers and that’s the fact you need to try them on before to realise how amazing they are. We see this as a fundamental step in our journey.”
The store has been designed to reflect an installation-style environment where tights are stretched in frames like pieces of art and text is written on the walls to explain the Heist philosophy. It will double up as an events space for customers and the wider industry, including talks with body and movement experts.
Mandeep Singh, co-founder and CEO of Trouva, the online marketplace for bricks-and-mortar boutiques, believes that when it comes to physical retail many lessons can be learnt from independents. He argues that often indie retailers are several steps ahead in terms of running events or introducing in-store cafés to add a community element.
As large retailers consolidate their store portfolios, Singh sees this opening up opportunities for independent brands that offer a “differentiated retail” experience where consumers want to spend a few hours and actually enjoy shopping.
“Disruption always creates opportunity for those who are going to be different and it’s two sides of the same coin,” he adds. “When others are struggling it creates opportunities for people who are going to be different and creative.”