Many retail analysts have prematurely written the obituaries of high street in-person shopping malls. Online shopping now accounts for almost a third of retail sales in counties like the UK. The pandemic was expected to be the final blow for physical retail shops. Consumers found it more convenient to shop online rather than risk being infected by mingling with other people in the high street.
The declining impact of the medical emergency on people’s movements should have signalled a desire of consumers to put the frustrating lockdown behind them and shop till they drop. This to some extent is happening. Research by consultancy firm Accenture suggests that 70 per cent of Gen Z customers plan to make most of their holiday purchases in-store. However, 54 per cent of Baby Boomers plan to buy primarily online.
Younger consumers obsessed with not being able to buy the latest gizmos because of a fear of supply shortages would rather physically pick up items than risk shipping delays. Undoubtedly, they must miss the long phase of limited socialising during the pandemic and would rather get out and do things with their mates.
But the challenges facing high street retail outlets predate the pandemic. While online retail sales are steadily capturing market share, shopping mall owners try to offer customers new experiences to lure them back to their physical retail outlets.
Shopping mall owners Uniball-Rodamco-Westfield surveyed European customers to understand what would make them return to shopping malls rather than buy online. One result of this research was that customers expect half of the shopping space in malls to be devoted to “experiences” rather than product sales. This is far more than the current share.
Some shopping malls have acted on this consumer desire and added posh mini-golf, cooking classes for kids and virtual football experiences for those shoppers who visit their stores.
Physical stores are also highlighting the negative aspects of shopping online. Online retailers often have inaccurate recommendations to prospective buyers written by those who have already bought specific products. Perhaps even more common, many of the pictures of products offered online can be misleading. Returning the product is often too much of a hassle compared to returning the wrong product to a physical store.
Online retailers are aware of the disadvantages of selling online. Amazon is thinking of opening physical retail outlets outside the US. Google opened its first store in New York to learn what customers like and dislike about its phones.
Shopping mall owners argue that the few weeks leading to Christmas will be a make or break phase for them.
The challenges facing high street retail outlets predate the pandemic
Even if much less acute than it was last year, the medical emergency is not over yet. The new variant of COVID, supply chain disruptions and high energy costs affect consumers’ shopping behaviours.
In the UK, shoppers are shunning the high street as retail sales have fallen in the last five months. Helen Dickinson, chief executive of the British Retail Consortium, says: “Fuel shortages, wet weather and low consumer confidence also contributed to lower consumer demand with household goods, furniture and books all hit particularly hard. Labour shortages across the supply chains, on farms, factories, warehouses and lorry drivers, all threaten to derail this recovery, and it is vital that the government finds a long-term solution to this problem”.
The local in-person retail industry faces the same and also some additional challenges. Getting to and from retail outlets has become increasingly challenging. Finding adequate parking after being locked up in traffic gridlock is not always easy. Some major retail outlets that attracted customers because they offered ample parking facilities are reducing their parking area to open new selling boots. I fail to understand this short-sighted and self-defeating tactic.
Hopefully, Omicron, the new COVID strain, will not be another stumbling block to retail sales recovery in the coming weeks, and consumers will feel the urge to get out and do their Christmas shopping in person. But the digitalisation of retail services will continue to grow. A good Christmas shopping season for shopping malls in the high street will be most welcome for their owners, but consumers’ shopping behaviour will continue to favour online shopping.
The click-and-brick strategy of retailers will still be the best option even if the online selling element will ultimately be the area of growth that will give the best return for investors.
As Joel Bines, a retail consultant of AlixPartners, argues: “Consumers have the power and you have to orient around pleasing them.”