Clicks to bricks and Brexit risks
Online retailers are increasingly turning back to the traditional storefront model, opening bricks and mortar stores on the high street in a bid to woo customers.
Amazon, as always at the forefront of new technologies and approaches, initially dipped its toe in the water by opening several bookstores in the US. They then dived in with their recent purchase of Whole Foods, and with over 400 stores across the US, the takeover has rocked the grocery world, even hitting the share price of rival chains in the UK.
Retailers in the UK who have also started to experiment with a bricks and clicks approach or to expand their high street presence include Ocado, who have recently teamed up with Marie Claire to open their Fabled health and beauty store in London. Boden are opening a flagship store on King’s Road following on from concessions opened in John Lewis stores and their original shop in Hanger Lane and, most recently, Microsoft have announced that it is opening its first UK store in London with a high-profile location on Regent Street at Oxford Circus.
So why are retailers looking at the physical store model?
It is attractive to customers to be able to see tangible goods – people like to see what they are buying and, of course, there is the convenience of walking out of the store with your purchase. A shop can also benefit online ordering by providing a central collection point. This provides flexibility for the customer and can save on distribution costs for the retailer.
A high street presence also raises profile and brand awareness. It gives customers a chance to experience the brand and see what types of goods are available to buy.
Etailers can also leverage the technologies of their online platforms in the physical space, introducing new technologies such as cashless shopping. This can also provide the ability to target local customers based on online data.
There are, of course, many additional factors to consider when moving from a clicks to bricks model. Inventory management requirements change and rent, staff costs, insurance, etc. must be factored in to the budget. Choosing the right location is a key factor, not only from a footfall perspective but also potentially in protecting or projecting the brand image.
Despite the recent moves by etailers, economic uncertainty, including fears around the impact of Brexit, has made many traditional high street retailers reconsider their expansion plans. Business rates also continue to be a particularly contentious issue, with the retail price index on which rates are calculated likely to continue to rise. A proactive approach to maximising tax reliefs such as capital allowances can help to mitigate this.
As such, whilst some etailers are moving on to the high street, the general picture shows a sharp reduction in new store openings in the second quarter of this year.