03 Jul 2018

Online isn’t the only elephant in the room

Call it what you will, retail is in trouble. There’ve been three retail revolutions in the last 100 years or so: once when department stores pulled shoppers into the first one-stop shops; another when supermarkets invaded the high street in the late 1950s; and again, when large out-of-town shopping centres emptied the high street. Now we’re in the middle of the slow train crash that’s the fourth retail revolution.

Not every retailer is doing badly, but many are. In home improvements, B&Q and Homebase have closed 165 stores since 2014 and more will follow. Among big brand retailers, Toys R Us and Maplin have gone. Debenhams is on the brink, and there are big store-closure programmes under way at House of Fraser, Mothercare, Carpetright, Poundland, Marks & Spencer and others. Even John Lewis is profitless and closing Waitrose outlets.

It’s not the end for all these big names. No one is suggesting M&S will fail, for example, but analysts have lost faith. One said M&S was founded in 1884 and is worth £4.7bn, while online retailer Asos was founded in 2000 and is worth £5.5bn. In 2014, M&S promised to work on the online challenge. This year it said: ‘the continued migration of clothing and home sales online means we have to modernise. Although sales are growing our website is too slow, our systems are dated.’ ‘Hopelessly behind the times,’ said its critics, ‘facing facts that have not been in dispute since 1999.’

Retail researchers Springboard estimate that closing a large high street store can lead to an initial reduction in footfall of 15-20% in surrounding shops. Once one goes, others are weakened.

There is no single cause for this turmoil. It’s a combination of higher business rates, higher minimum wage, the apprenticeship levy, ever rising retail rents, and lightly taxed online competition, but online is growing fast and pure bricks and mortar retailers are growing slow or going backwards. It isn’t a question of one or the other – omnichannel retailers are doing well – but online is the biggest elephant in the room.
In windows, the nationals are slowly dying. They created the market, but they’re struggling to change an outdated business model. They’re under attack from consumer groups, Which? Magazine and many in the industry for inflated prices, hard sell and a ‘fit and forget’ customer service. The critics aren’t all fair, but Everest is now headed by a turnaround expert, Safestyle has issued an injunction against Safeglaze and lost its chairman, Anglian is keeping its head down, and Entu is back on its feet for another round.

What if they weren’t there anymore? Their big-spending marketing campaigns generate a large chunk of the quality leads the industry relies on. If the nationals convert one in five leads they bring to market, the other four ask local retail installers for a quote and three will probably buy. That’s a big hole to fill.

Who will market the industry, if the nationals don’t? Who will generate new quality leads, and bring new customers for installers into the market? Farther up the supply chain, what will be the effects on your business model?


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