The retail sector has changed radically in recent years. Factors driving these changes include internet retailing, store closures and other changes on the high street, and an increasing consumer preference for large multi-purpose malls.
Since 2007, the retail sector with the most stores affected by company failures has been the clothing sector, accounting for 25% of all stores affected. Off licences accounted for 16% of stores affected and footwear stores accounted for 13% of stores affected. The Local Data Company collects information on town centres in Great Britain.
The vacancy rate varies by type of retail premises and region, compared to the national average of 11.2% in the second half of 2017:
• The vacancy rate in shopping centres was 13.2%, and the vacancy rate in retail parks was only 4.9%
• Of the regions and countries of Great Britain, the North East has the highest vacancy rate: 14.1%. Greater London has the lowest: 7.9%.
Shopping on the internet is increasingly popular, and this is transforming the retail sector.
The popularity of buying goods via the internet varies considerably by type of shop.
In the non-store shop sector (which mainly consists of internet sales, but also any retailers that do not have a permanent physical store, such as catalogue-order businesses, market stalls and pop-up stores) the vast majority of sales were via the internet.
Internet retailing is more popular in the U.K. than in any other E.U. country.
In the U.K. 82% of residents made at least one online purchase in 2017, similar to the proportion in Sweden, Demark, Luxemburg and the Netherlands. In Germany, 75% of residents made online purchases in 2017. The figure for Ireland is 53%, below the EU-28 average of 27%. The figure for Romania is 16%, the lowest in the EU-28.
Physical shops, high streets and shopping centres have adapted to the rise of internet retailing by changing the experiences and services that they offer to customers. This can be seen in several broad trends.
The growth of click and collect and omni-channel retailing: online retailing has not resulted in a simple substitution of physical shopping for online shopping, although this has happened to some extent. Instead, successful physical stores have developed online services that are complimentary to their physical presence. Modifications include offering customers the option to browse goods in the store and then order them online, or pick up goods they have bought online in physical stores.
In 2014, 14% of John Lewis customers researched and bough their goods online, 12% researched in the store and bought online and 23% researched online but bought in the shop (the remainder, 51%, researched and bought in the physical store).
It has been suggested that the role of physical stores will increasingly be that of a “shop window”, with customers browsing and picking up in person, but most transactions occurring online.
The increasing popularity of beauty or personal service shops: the Local Data Company reports that between in 2017, most retail sectors saw a net fall in the number of units across the country. But barbers, beauty salons and nail bars all saw net increases in the number of units.
The increase in this sort of unit is indicative of the type of service that customers value and cannot get from the internet.
The growth of mixed use malls which include shops, cinemas and food and drink outlets. It has been argued that consumers should not be analysed in terms of discreet purchases, but rather by the trip they make to the shopping area.
Supermarkets are where many people buy their food and other essential items, they are innovative businesses that have transformed the retail environment and, in some cases, they are also significant global brands.
The decade to 2012 was a period of rapid expansion for the big four supermarkets (Tesco, Sainsbury, Asda and Morrison). These stores’ market share in groceries grew from around two thirds in 2000 to over three quarters in 2011. This growth was accompanied by a number of other features: broadening product ranges, more and larger stores which were often located out of town, and increased multi-channel retailing (including home delivery and click-and-collect).
The five years since 2012 have seen many of these trends reversed. The market share of the big four supermarkets has fallen from 77% in 2011 to 68% in 2018.
The major supermarkets have also altered the profile of their estates, with a concerted move away from out of town stores towards town centre convenience stores and ‘small supermarkets’. In 2014, Sainsbury’s announced that it had more convenience stores than supermarkets; Tesco, the UK’s largest retailer, announced that its convenience stores outnumber its supermarkets in 2013.
This decline in the market share of the big four was accompanied by the rapid rise of the lower costs, “no frill” competitors: Lidl and Aldi. In 2008, the combined market share of Lidl and Aldi in the Great Britain groceries market was 5%. In 2018 it was 13%.
These stores are characterised by a smaller range of goods and generally lower prices, compared to the big four supermarkets. Changing consumer behaviour has also affected the big four supermarkets.
In recent years, consumers have begun to make more frequent, smaller value shopping trips. Consumer preference has shifted in favour of single item purchases, rather than ‘multi-buys’. And, the trend towards increased online purchasing means that a large stock selection in store is no longer crucially important.