After a drop in 2015, the shop vacancy rates in the U.K. has risen again slightly last year showing that more retail and leisure units in our city centres are being left vacant. There’s also a drop in the number of actual units available across the U.K demonstrating a lack of investment in towns and cities.
Retail is definitely changing. Even the experience of going shopping today has changed to how it was when I was younger.
Recently my wife and I did a little Christmas shopping in Cardiff and popped in to the new Tim Hortons coffee shop. We had heard about the opening of their first Welsh location via their very effective local PR (I had never heard of the brand before they opened in Cardiff so their launch marketing worked a treat).
To say I was disappointed in my Tim Hortons experience would be an understatement. I expected a typical coffee shop experience with donuts added, something more akin to what I get from Krispy Kreme when we take the kids on an occassional treat. What we got at Tim Hortons though was something more akin to shopping at Argos (or McDonald’s these days) – a fast food, take a number and wait experience. Cheap, filtered coffee and frankly underwhelming donuts (the ultimate sin).
But, I will admit, the customer service was good, speedy and the prices were reasonable. Their branding is very nice and they have a clear corporate responsibility vibe going on which is positive but for a couple who are Costa Coffee fans, the experience at Tim Hortons left us flat because it didn’t match our expectations of what a coffee shop should be.
They’re clearly a successful brand so I’m sure it’s just the case that my wife and I don’t fit their target audience. Perhaps they’re more aligned with the millennial audience – those mid to late twenty-somethings who like brands to be modern, responsible and hip and want instant gratification (so quick service is a must). We didn’t see any other middle aged customers there when we visited and it was packed.
There does seem to be a shift in shopping at the moment with brands struggling to get footfall, political and economic pressures, lowering income and a rise in unsecured lending putting added pressure on retailers. Local rates and rents are increasing putting additional stress on an already stressed industry. Our shopping habits are changing, online eCommerce is growing year on year and subscription services such as Netflix and Amazon Prime are adding to the pressure on traditional retail.
Let’s take a look at a few examples of how some of the big retailers are responding to our changing shopping habits.
Amazon’s move into brick-and-mortar retail
Amazon seem to be pivoting in their furniture market, adjusting towards something more like Ikea, allowing customers to touch and feel their furniture before buying (with delivery done through their existing network) and they have also purchased the retail brand Whole Foods – an organic produce retailer in the U.S. Another direct move into bricks and mortar retail for Amazon.
Having disrupted the retail industry for over 20 years now by providing easy ways for consumers to buy online they’re now moving into the physical store arena. What has prompted this move? In simple terms, even with the growth of online shopping, it still only presents a small part of all retail. Plus, Amazon can do something that other retailers can’t – that’s integrate their online and offline experience making their stores more like small warehouses were you can collect your ordered items (and in the process browse and buy from a few well selected items in store).
Ikea’s move to online retail
With Amazon moving towards bricks-and-mortar it’s interesting that Ikea are moving the other way with more of their stock being available to buy online and even experimenting with offering their items through third-party eCommerce retailers (Amazon perhaps?).
Ikea have even moved into the Gig Economy recently having purchased TaskRabbit – an online marketplace for freelance workers. For a long time now, Ikea has offered a deliver and build-it for you service so their purchase of TaskRabbit is just an extension of that service and will allow them to offer a greater range of home services in the future through an army of self-employed workers.
I’m a huge fan of the Ikea retail experience. As a parent they’re one of the very few retailers that make an effort to appeal to parents with their free childcare, cheap food options and play areas. Why more businesses don’t do this is baffling to me – if my target customers were parents I would certainly look at Ikea as a model of how to bring more parents into my store.
McDonald’s pivot to self-service and delivery
For a brand that was established on an idea of fast counter based service it’s interesting to see how McDonald’s has changed recently. If you haven’t been to one of their restaurants recently you won’t have experienced the new self-service machines where you can select and pay for your food without speaking to a human being. You can even have your food delivered to your seat or even (if you’re in range of an Uber Eats service) your home.
McDonald’s have even introduced tablets for the kids (and big kids) to entertain themselves while they eat, charging points for phones and laptops and free WiFi in all stores.
Why have they done this? Well, the self service has undoubtedly saved the franchises money by increasing efficiency and reducing errors. Sales have increased because now customers can browse their menu without the pressure of a long queue behind them so they’re more likely to order more. The kids are happier which means parents enjoy the experience more and thus are more likely to revisit again in the near future (the cheap ice-cream helps).
Costa coffee pivots to more food options
Whitbread, the owner of the Costa Coffee brand recently published a report showing that sales across their stores has dropped slightly. They put this down to less spending power of their customers and an increase in the smaller, artisan style coffee shops opening.
The growth in coffee in the U.K. in recent years has been phenomenal with more and more brands appearing on our high streets apparently daily so it’s no surprise that Costa is feeling the pressure after an amazing growth period for the brand. Their response to the slow down in sales is to offer more food options and if you visit a shop you can select from a huge variety of cakes, wraps and more. Personally, I like my coffee black and without cake but a lot of people will purchase a drink and food.
They’re also putting more of their self-service machines in more places too.
Will it work? Time will tell but I wouldn’t be surprised to see Costa show more signs of slow down in sales. The industry is ready for disruption by a younger start up targeting a younger audience. Costa does have an older generation feel about the brand, Starbucks sales are also weaker than expected and more independent brands are opening putting more pressure on these large brands as customers look for a new experience (and coffee snobs want to find that perfect coffee).
What can you do in 2018 to gain more customers?
Given the changes other retailers are making to their brands, what can you learn from these to improve your profits in the coming months?
Although shoppers today are happy to buy online there’s still a desire to shop in cities and town centres. The difference now is that shoppers are looking for an experience when shopping. For example, my wife and I will go into the city with our children and combine shopping with either a treat (Krispy Kreme anyone?) or lunch. We are happy to browse a few shops and enjoy the experience of the city centre as an experience in itself.
As parents we’re going to gravitate towards shops and restaurants where our children are welcome and stores that offer more than just a shopping experience (Ikea for example). Customer service is the key in 2018 – provide an experience beyond that of just offering products for sale and you’ll build customer loyalty and bring more people to your stores.
Customers can buy whatever they want cheaply online and have it delivered the very next day so why should someone walk through the doors of your store instead of buying online? What’s can you do to make the experience of shopping part of the appeal of your store?