This Week In Retail – High Street Struggles

To kick off with this week, we open with ONS’s latest statistics showing retail sales stalling in April. Although retail sales are higher than expected at 5.2% which has been attributed to the warm weather and a surprising lack of impact on spending because of Brexit. Sales have therefore increased by 1.8% in the lead up to April, which has largely been catalysed through consumers being tempted towards clothing sales following a bit of sun. However, it’s not all positive, with continued falling sales across department and household goods stores – amplifying the woes of the high street in recent times. The key takeaway here, is just how well this illustrates the changing nature of (particularly brick and mortar) retailers in the face of e-commerce and digitalisation. Sales from online-only retailers have increased by 9.4% – the highest three-month comparative growth rate since records began. The nature of the physical store is changing, from a simple store where consumers browse and purchase products, to alternative offerings, such as providing a complete customer experience – seen particularly in luxury brands. From a sustainability angle, we have seen some clothing retailers utilising stores as a recycling point – offering consumer discounts and creating a circular economy for their products. The question here is how well can these traditional high street stores innovate and become relevant for the future?

The pressing need for these retailers to adapt in the face of this, has been highlighted by even more recent store closures. Debenhams has closed its last store in Australia, although it will still maintain an online presence in the country. The group are however, opening three stores in Oman, The United Arab Emirates and Qatar, showcasing a shift in global strategy but with 22 stores still set to close by 2020 in the UK there is still a lot to do. Elsewhere, the Walgreens Boots Alliance has submitted 200 stores under review for closure in the next two years, following the likes of Debenhams, Mothercare and Homebase in pursuing operational restructuring.

Sustainability is ever-present at the top of both businesses’ and consumers’ agenda and has shown a staggering amount of innovation in recent months. Kroger and Walgreens have joined the likes of P&G, Nestle and Unilever in adopting ‘Loop’ – a packaging initiative run by the company Terracycle. Consumers can opt to use reusable steel, glass and plastic for everyday items – with UPS picking up these containers once used free of charge. In addition to this, the sustainable impacts of this initiative will be tracked, such as the carbon footprint from shipping containers back and forth. Utilising this circular economy model (or as Tom Skazy the CEO of Terracycle calls it, the ‘milkman model’) will have greater positive impacts as consumer uptake increases,  similarly to fast fashion companies’ sustainable initiatives.

Lastly, onto my favourite topic – innovation. To start with, Amazon has followed the likes of Lyft and Uber in gamifying work for their employees. Through replacing monotonous, repetitive tasks with incentivised games, Amazon is hoping to improve engagement, productivity and employee happiness in the warehouse workstations across five distribution sectors from Seattle to Manchester. Elsewhere, if you’ve ever been disappointed by your pizza delivery, Dominos in New Zealand has sought to answer your problems. Through utilising AI in the form of pizza scanners above cutting stations, Dominos analyses and grades the pizzas based on size, the amount of toppings and the distribution of toppings. If the pizza does not meet requirements, it is rejected and workers must remake the order. This is first step in Domino’s innovation journey, as they soon hope to allow consumers to witness their pizza being made in real time.

Author

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Raj Ganatra

Associate Consultant,Strategy and Innovation.