Digital and in-store experiences will help retail sector attract consumers
Digital and in-store experiences will be part of ‘recipe of success’ in attracting consumers as new decade will also see revival of small independents on UK high streets, according to new report from NatWest and Retail Economics.
21 February 2020
Research by NatWest and Retail Economics found that two in five people use their smartphones to discover new products, influencing their buying behaviour online and on the high-street. Shoppers expect to transition from physical in-store browsing to digital channels seamlessly, and often at the same time in a customer journey that suits them. Younger generations are more likely to search for products online, with 67% of 18-24 year-olds using their smartphones to research new products compared to just 9% of over 65s.
Online retail sales have risen three-fold in the last decade, rising to over £75 billion in 2019 from £18 billion in 2009, the report finds. While retail on the high streets still accounts for 80% of total retail sales, retailers are reassessing the value of physical stores and how in-store shopping can take advantage of online and media channels instead of just being outlets that distribute products. Pre-tax margins for the top 150 retailers UK have more than halved from 8.8% in 2009-10 to 4.1% in 2017-18 against a backdrop of rising operating costs and increased competition. The emergence of digital will see retailers react by creating an experience led customer journey, which addresses the blurred lines of online retail and high-street foot fall with the development of virtual in-store experiences to give consumers a reason to visit and attract brand loyalty, translating into incremental spending.
The 2020 UK Retail and Leisure Outlook report also predicts that smaller, independent shops, leisure and entertainment businesses will make a return to the UK’s town centres as consumers look for products and services relevant to their local community. Research shows large, multiple retailers occupy 20% more space than they can financially justify.
David Scott, Head of Retail and Leisure, NatWest, said: “Consumer behaviour is changing our high streets and the way we all shop. With the growing dominance of digital, there will be an expectation that retailers offer ‘instagrammable’ experiences, on top of the products and services they’re selling, to keep customers coming to their stores and shopping with their brand. The customer journey matters and what we will see are retailers needing to blend the in-store journey with how customers buy online in order to remain competitive.
“We’ve seen big names disappear from our high streets as businesses have failed to evolve quickly enough, and we may not have seen the end to this. But while there have been challenges and worrying headlines of job losses, there are also opportunities for smaller, independent shops to come back and serve their local communities, giving consumers an authentic and genuine reason to visit. As we head into a new decade, consumers are feeling generally more positive and it’s up to our retail and leisure sector to respond and benefit from this.”
Consumers are heading into the new decade feeling more positive, with two out of three saying either that their personal finances had improved since 2019 or would remain at similar levels. However, overall consumer confidence remained stagnant in 2019 with Brexit still remaining the top worry for consumers with 37% saying that leaving the EU was their single biggest concern, down on 2018’s figures of 49%.
Richard Lim, Chief Executive, Retail Economics, said: “Brexit still brings uncertainty to consumers and the retail and leisure industry, but this is not the issue keeping chief executives from the sector up at night. The pace of change facing the industry is building pressure on businesses to adapt quickly and pivot their business models to meet the high expectations of consumers. Stores will always have a place on our high streets, but the cocktail of the rise in online retail, high operating costs and the impact on profitability will mean that the industry will need to offer something new, digital and relevant to keep customers interested.”
Read the full 2020 UK Retail and Leisure Outlook report.