The British High Street is facing a period of rapid change. Shifting tastes, pressure from online competitors and high costs are forcing shops to respond quickly to stay afloat.
So, does this mean the end of the high street? Perhaps not, but it is vital that the industry maintains a flexible approach and gets ready to adapt all aspects of business, from point of sale to finance providers.
A nation of shopkeepers?
The last six months have been turbulent for retailers. High-profile chains, including M&S, Waitrose and New Look, have announced store closures and others have gone into administration or dissolved completely. Some independent shops are facing a similar prospect.
There are multiple factors putting pressure on traditional retailers. E-commerce, for example, has changed consumer habits. Digital marketplaces can offer more variety and better value products. Many people see online shopping as more convenient than visiting the high street.
High costs on the high street
For many shop owners, rising costs are also a challenge. Traditionally, retail is an employment-dense industry, and with the minimum wage rising each year, alongside additional costs such as pension contributions, it can be challenging to manage associated costs. Our research found that 60 per cent of retail SMEs see their profits affected by rises in employment costs*.
Similarly, the cost of property is significant. Rising rent on stores in town and city centres is considerable, and while online firms can move into cheaper areas, shops are often dependent on central locations. Our most recent research found that 23% of retail SMEs’ state paying down debt as their main priority*. This highlights stresses in industry.
Adaptation is key
According to Which, the story doesn’t have to be all doom and gloom though. While the high street is changing, if retailers can adapt to what consumers want, they can still triumph. It is predicted that the high street will become a place for entertainment, with fewer traditional stores and more social hubs.
This move towards a community focus is already manifesting itself. The Centre for Retail Research has found that restaurants, coffee shops and beauty salons are becoming more popular. These services cannot be found online, so demand remains steady, enabling companies to move into spaces left empty by the likes of clothing businesses.
It’s also worth noting that some have successfully merged their digital and offline offerings and are thriving. Take Apple as an example, the technology giant focuses on the consumer experience, rather than products. By offering a true-to-brand encounter whether on or offline, they successfully combine modern and traditional services.
Finding flexible finance
Although the way we use our high streets is changing, it is unlikely that these central hubs will disappear completely. Businesses need to adapt to reflect consumer’s lifestyle choices, providing value and experiences to stay relevant.
In times of substantial change, alternative finance can help. Invoice finance, asset finance and asset based lending can all offer retail companies the headroom required to make key strategic and structural changes.
*All figures, unless otherwise stated, are from a GMI survey conducted April 2018. The Close Brothers Business Barometer survey canvassed the opinion of 894 SME owners and business managers from several industries across the UK and Ireland on a range of issues affecting their businesses.