Online shopping is now a part of everyday life for many people and the COVID-19 pandemic has only served to boost online sales, with many physical stores having to close their doors for a large part of 2020. Is the traditional “real” store struggling and, if so, what can be done to save it?

Let's look at the stats

The Office of National Statistics (ONS) reported in 2018 that, whilst online spending was growing, consumers were spending the majority of their money in stores, and the majority of online spending was done within “non-store retail”. So, where businesses offered a physical store in 2018, the data suggests that consumers preferred to spend their money in-store as opposed to online.

However, the statistics for 2020 paint a different picture. Using turnover data obtained from some 5000 retailers in October 2020, the ONS estimates that in-store sales (excluding fuel) decreased by 3.3% from February to October, whilst online sales increased by 52.8% in the same period. Clothing was the only sector (excluding fuel) with sales still below pre-pandemic levels.

Clearly, the pandemic has a lot to answer for: clothing stores were closed during lockdown periods and, even when open, the guidance to stay at home wherever possible means that footfall has inevitably reduced. However, in 2019 the ONS reported that “non-store retailing” provided the largest contribution to year-on-year growth, with non-food stores being the smallest contributors to growth. So, the impact of the pandemic aside, there is evidence that consumers were already shifting more towards online shopping. What can be done to help physical retail space thrive once again?

Is “re-positioning” a way forward?

Industry research suggests that up to 75% of retail landlords are considering repurposing their retail assets but the majority will first look to reposition their retail schemes with a revitalised offering before considering alternative uses.

What can landlords and tenants do to revitalise their retail stores rather than repurpose them? Landlords need to look at enhancing their offering to create a modernised, differentiated and exciting tenant and use mix. Both sides should embrace tech to drive footfall. Equally, both sides should look at their collaborations. Retail collaborations should go beyond click and collect points to bring customers back into the stores. Bringing in concessions and brand partners or offering complementary services give shoppers another reason to visit the physical store. Offering more experience-led destinations mean that stores can become brand showcases.

Branching out beyond core retail use

If a business cannot be profitably re-positioned solely within the retail sector, another option is for a business to diversify its offering and/or re-develop existing premises for alternative uses.

John Lewis has recently announced that it intends to enter the private rented sector, to “repurpose and potentially reduce” its shop estate and put “excess space to good social use”, whilst strengthening its retail offering by focusing on fewer stores. Also branching out into the UK housing market is IKEA, through its subsidiary BoKlok, which has just secured a resolution to grant planning permission for a sustainable scheme in Worthing, comprising 152 affordable homes as part of an “enhanced biodiverse landscape design”.

Whilst such proposals are to be applauded for providing much-needed housing, diversification of this kind will clearly not be an option for all retailers. For smaller businesses, a sharper focus on logistics may help to improve profits The “last mile” – the movement of goods between a transport hub and a delivery address – can be a real headache for retailers but investment in efficient logistics can yield real results when it comes to consumer spend, satisfaction and loyalty. The main aim of “last mile logistics” is to deliver items securely to the consumer, as quickly as possible. Retail giants recognised the importance of this a little while ago, with Amazon launching its own shipping service in the UK in June 2020, and CNBC reporting in August that Amazon is now delivering two-thirds of its own packages in the US.

It will often not be an option for smaller outfits to take shipping in-house, but the data strongly indicates that by investing in the short-term in this crucial part of the supply chain, principally by forging relationships with reliable delivery companies and engaging with the latest logistics technology, retailers will reap dividends in the long-term, enabling them to flourish both in-store and online.

Welcome planning reforms

Major changes to the permitted development regime came into force on 1st September 2020, the most significant being the creation of a new “Commercial, Business and Service” use class (Class E).

Class E encompasses a wide range of uses, which prior to 1st September were classified das separate uses from a planning perspective. This gives businesses flexibility as there is no longer the need for planning permission to change between uses, so potentially a shop could become a restaurant, or a gym could become an office without the need for permission. But how does this help retailers to survive, and indeed thrive?

First, it allows for an unoccupied asset to be brought back into use, for a potentially very different use to that which had existed before without the need for planning permission, thereby saving time and expense for everyone involved.

Secondly, whilst the recent changes do not allow for pure mixed use, the Government has stated that the main driver of change is the need to enable a repurposing of buildings on high streets and town centres. Therefore, the direction of travel is clearly towards flexibility of use, and we consider that it will now be much easier to obtain permission for mixed use than it has been in the past. A local authority will surely struggle to argue against an application for mixed use in light of the Government’s clear support for flexibility of use, meaning that a retailer should now find it much easier to obtain permission to, for example, introduce a café within its store, or to incorporate a storage/
distribution facility within its retail premises, or to diversify in all manner of creative ways.

Of course, retailers may already introduce such uses without permission where they are ancillary to the main use (this has been the case for some time) but the fact that it should now be easier to obtain permission for a pure mixed use could give rise to a variety of new, exciting physical retail spaces, challenging the more traditional single use model.

Future of the physical store

While Covid-19 has accelerated the rise of online shopping, there will always be a place for the physical store. We have seen the large queues outside non-essential retail stores when they reopened after the lockdowns were lifted suggesting that there is still a very strong appetite for shopping “in person”, possibly even more so now that people have experienced life without it. There is an opportunity for retailers to start innovating their physical space again so that they really tap into the emotion, human connection, sense of discovery and community.

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