Mishcon de Reya recently hosted a Shaping Cities roundtable discussion on the future of retail. Against the background of economic uncertainty and gloomy headlines for the high street, we assembled some of the leading lights of the industry. The debate was chaired by Retail Week's George MacDonald, who facilitated an energetic conversation which enabled us to map out the future for retail. An initial McKinsey presentation on smart cities set the scene before attendees moved on to an animated discussion on how we were going to breathe new life into retail destinations.
The discussion revolved around the following main themes:
- Is the failure of retail about tech and the internet? Some felt strongly that the problems couldn't be wholly blamed on the internet. We are suffering from a lack of wage growth, margin pressure and the oversupply of retail space. The internet – which now accounts for 80% of non-food retail – has taken growth but according to our experts, has had minimal effect on retail bricks and mortar sales.
- We need to get back to more experiential retail. As New West End Company CEO Jace Tyrrell pointed out, 100 years ago Oxford Street was much more experiential. The challenge now is to bring this element back to entertain the 200 million customers who come to the area. He suggested that there is 20% too much retail, so that other uses need to be introduced into the mix. There was general agreement round the table that we need to create excitement as the customer is fed up with high streets that are seen as boring and generic.
- How do we create great places? We need to work out how to create great places. It was interesting to hear from Brian Bickell, CEO of Shaftesbury, the owner of a vibrant part of London's West End which includes ‘villages’ surrounding Carnaby Street, Chinatown and Seven Dials in Covent Garden. "Heritage is important," says Bickell, pointing out that we have moved on from the original shopping centres. He believes that people need places to socialise and that there is no value without human interaction. In addition, the planning system must be sufficiently flexible to enable repurposing. "We try things and move on if it doesn't work". Bickell also pinpoints the problems of curating an area if there is diverse ownership by landlords who won't collaborate. On the other hand, the London estates –which include Shaftesbury along with the likes of Capco and the Crown Estate – are able to create a vision for their areas. And he said, "bricks and mortar and the internet are not mutually exclusive".
- Brick and digital are merging. The theme of physical and online merging was continued by Amanda Scott, MD of beauty store Fabled, a JV between Ocado and Marie Claire which is breaking the mould in beauty. It focuses on beauty and wellness, stocking niche and premium brands. Scott talked about the opportunities created by the combination of physical and online to inspire and engage with customers. For instance, there are opportunities for enhanced engagement through live streaming of trends and also by linking digital access to areas beyond cosmetic products to well-being, leisure and sports.
- The relentless growth of online shopping. Retail guru Richard Hyman told us that 15 years ago UK online retail was 0% and now it is worth £65 billion. Also over that period online has added 160 million sq ft of trading space, "equivalent to 70 Westfield Londons". Over the 15 years, physical retail space has also gone up. As a result there is far too much physical retail space. "It's not a battle but multi-channel retailers will be shutting physical space". He told us that in 35 years of being in retail, he has never seen such massive economic change.
- The future of retail is not about selling. Ross Bailey, the charismatic founder of pop-up platform Appear Here (who as he said has only three and a half years' experience to call on!), told us that the future of retail is not about selling. Tech companies are looking at retail as a media channel so it has an audience and variable costs. As a result, he believes we need to make physical retail a variable cost centre. Last year, he said, 2,500 shops shut in the UK but in London alone Appear Here launched 4,500 pop-ups. "You could argue that tech is the problem and the opportunity," he said. "The online brands are finding that physical retail is a more profitable route to customers". Bickell added that retailers can boost internet sales by using its physical space as a shop window. By way of example, Bailey pointed to the online dating site Match.com, which took a pop-up shop to sell 3-D printed boyfriends, resulting in a 100% increase in their online business
- Our favourite shopping experiences. To underline the overwhelming preference for independent, niche shopping experiences, guests were asked to name their favourite shopping destinations. The eclectic choices included the new and trendy Coal Drops Yard and its great innovative stores such as Wolf & Badger, Christopher Raeburn and Tom Dixon, Unicorn Meadow at Meadowhall (everything is bubble gum pink!), New York's mega American Dream shopping mall which is 60% leisure, Selfridges, the new concept Aldi, Gucci New York, Tel Aviv's farmers' market and Fashion City Dubai.
It was an illuminating discussion and encapsulated how retail, in all its multi-channel forms, needs to evolve in order to survive, thrive and to satisfy the consumers' needs and expectations.