Full Sites and Empty Stores
By Bernice Hurst, Managing Director, Fine Food Network
There are many problems and not enough solutions when it comes to facilitating consumption.
John Clare, chief executive of DSG, the British company whose electrical goods brands, Dixons and Currys, have been high street stalwarts for decades, told attendees at the IPD/CBI Property In Business conference in London that landlords must become more flexible if they want to keep their stores occupied.
"Space requirements will substantially reduce over time as internet retailing continues to explode," he said.
Mr. Clare's comments come on the heels of a holiday season where internet sales rocketed up by 40 percent leading up to Christmas. According to the Financial Times, analysts estimate almost all the growth in total U.K. retail sales, up two percent in 2006, came from online sales. Physical store sales have been stagnant for several years.
"A lot of retailers are saying they don't want to take more space on, travel agencies are cutting back space like mad, banks need less space, you are not seeing CD or DVD retailers opening new stores," he commented.
Mr Clare's own business now sells about 12 per cent of its products online. "Three years ago I predicted the figure would eventually hit 10 percent but few people guessed how fast it would grow," he said. "I now expect 20 percent within the next three years, perhaps much more. It could be double that."
Suggestions about the way forward ranged from focusing on shopping centers that create a "social" atmosphere by providing restaurants, bars, coffee shops, cinemas and fitness facilities to developing "internet pick-up point parks."
The contradiction from the U.K. consumer's perspective is that this comes at a time when people are being advised to spend less time in cars. Locating stores outside of town centers (which, in any case, have little or no convenient parking for shoppers or those collecting items ordered online) goes against the trend.
Encouraging customers to travel further, particularly in the U.K., could only be seen as a positive in a cynical way. As the government is introducing trials for road charging to ease congestion, some critics might say that forcing more people onto the roads is just a way of getting them to pay more for what they want to buy.
The other paradox lies in what they will find when they get to the store. If it is simply a pick-up point for items already ordered, there will be little or no stock. Deliveries of smaller quantities of a possibly bigger range could be interpreted as uneconomical. Or, stores might try to increase customer spend by increasing their range and encouraging collectors to have a look around and buy even more.
If such a scenario actually came to be, what we might see is fewer, smaller, emptier stores to which customers have to travel further. On the other hand, the extra facilities could encourage socializing and a new form of community. Perhaps there is a silver lining after all.
Discussion Questions: How will the growth of online sales affect physical retail space (stores and/or distribution centers) and rent/lease/ownership costs? Do you see John Clare's description of what is happening in the U.K. taking place here?