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Wednesday, December 13, 2017

Are Brits heading back to the high streets?

As recent figures suggest internet shopping is set for a slowdown, we look at the emerging trend for online retailers to open physical stores.

With the seemingly unstoppable rise of online shopping, the future of bricks and mortar stores had been looking decidedly gloomy. But it appears that reports of its pending demise may have been exaggerated.

Research from property group Colliers International shows that the rate of growth in online sales is set to slow by 2021, from its current level of around 11% to 7%[i].

In anticipation of this downward trend, online retailers are increasingly looking at how flagship physical stores can showcase their products, boost sales and raise brand profile as they adopt a more multi-channel approach.

Many consumers still prefer to research products online and make the final purchase in store. Could some much-needed vitality be injected back into local high streets?

Rise of ‘showrooming’

The Colliers research analysed the behaviour of more than 30 online brands which are becoming ‘showroomers’. Their physical stores are designed to raise awareness of the company, promote brand loyalty and give customers the chance to see, touch and feel the products. 

The report highlights fashion brands that are opening a growing network of physical stores, including Boden, Joe Browns and ME+EM, one of the Duchess of Cambridge’s favourite online brands, which has just opened its third bricks and mortar store in London.

Another retailer at the forefront of showrooming is online furniture shop made.com, which opened its first showroom in Charing Cross Road in London. It’s now opened another outlet at The Mailbox in Birmingham.

Electronics firms Samsung and Dyson are also reaching customers directly through their own stores rather than relying on stockists, bringing more new shops to high streets and shopping centres.

Paul Souber, co-head of EMEA retail at Colliers, says: “With the rate of web sales forecast to level out over the next four years, many e-retailers have identified ‘showrooms’ as one of the remedies to a decline in profits.

“The trend is also driven by cost considerations: it’s not uncommon for 40% of online fashion orders to be returned by the customer without making a purchase. This is imposing a huge logistical and cost burden on the online brands.”

Opportunities for boosting revenue

It’s already been established that opening a physical store can increase web sales. Research by British Land shows that internet retailers who opened a physical store saw online sales increase by 52% in the area where the shop was located[ii].

A good case in point is Hotel Chocolat which, for many years, was purely an online brand and was reluctant to open physical stores as it thought such a move would increase its overheads significantly and diminish online sales in places where shops were located. However, when it dipped its toe into the physical water, it found that it actually boosted online sales as the store acted as a subconscious advertisement for the brand. Today, it has around 100 stores in high streets and shopping centres across the UK.

Lower rents for retailers

Renting physical space has benefits for both landlords and retailers. Colliers says that because showrooms are often situated in non-prime properties and units that wouldn’t appeal to mainstream retailers, the rents they command are often acceptable to both the landlord and occupier.

The landlord is letting a property that might not be in demand, while the retailer is getting a lower rent than it would pay for a mainstream store.

In addition to rent, businesses setting up physical stores also need to make sure they have the right insurance in place to meet their needs.

 

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