READ some of the headlines over recent weeks and you’d be forgiven for thinking retail is dead or dying. Or at the very least that retailers are in retreat.
It’s certainly true that these are tough times for the industry. Over the key Christmas trading period retail sales dipped, despite widespread discounting. Footfall continues to wilt, shop vacancies have risen, and more household names on our high streets have either stumbled or tumbled. Meanwhile retailers’ profits have halved over recent years, to three percent of turnover.
The drivers of this seismic change are structural, economic and regulatory, and result from shifting shopping habits, new technology, stiff competition, weak demand, and burgeoning costs.
For example, 86% of us shopped online at some point last year. Online penetration is highest in categories like household appliances, at over 50%, with computers, toys, and footwear just behind. Indeed, online accounted for 34% of all non-grocery retail sales in December.
High streets and retail parks have lost out, but the growth rate in shopping online has slowed, and four-fifths of retail sales still take place in-store.
Meanwhile customer demand has been becalmed, due to economic and political uncertainty and rising household costs. Our data shows retail sales growth has essentially been flat for three years. More of us seem to spend a greater proportion of our incomes on other things nowadays, such as eating out, holidays, mobile phones and subscription TV.
Yet for all the doom and gloom, retail sales growth in Scotland actually nudged up – by 0.3% - in 2019. Not exactly stellar, but growth nonetheless. And whilst disruptive market entrants have made their mark, noticeably in fashion and grocery, the biggest change has been falling prices making food and clothes cheaper for consumers.
Yes, the industry has shed jobs. However, it continues to be Scotland’s largest private sector employer, providing 240,000 jobs. New roles are being created in online merchandising, customer loyalty programmes, events planning, personal stylists, and logistics.
Even if growth merely matches that of the past ten years, Scottish retail sales could be £27 billion by the end of this decade, up £2bn. The prospects are even brighter if the economy becomes more buoyant, employment remains high and wages outpace inflation.
The industry is one of the most dynamic, accounting for 12% of all new firms formed. Retailers are re-inventing their business models and investing in technology, skills and logistics capabilities.
The industry invested £2.1bn in new technology and R&D last year, up a quarter. This can be seen in significant new investment in in-store technology and order points, home delivery and fulfilment, click and collect, digital loyalty programmes and customer payments, and new own-brand products.
Stores are rethinking their role, offering more advice or personal service, unique products, or more experiences. For example, furniture stores are offering advice on interior design, bookshops are hosting talks by authors, and department stores are holding cinema nights.
The industry is in the midst of a revolution, and all of its investment – from new ways of working to sharpening prices – is because customers are demanding it.
Keeping pace with what customers want is crucial. Customer demand for more ethical practices is why we’ve just published the first ever voluntary guidelines on vegan fashion, so that retailers can provide customers with the utmost assurance that vegan fashion goods can be purchased with confidence.
Rumours of retail’s death have been greatly exaggerated. Far from travelling in the direction of the mortuary, the sector is resilient and transforming itself for the future.
David Lonsdale is a director of the Scottish Retail Consortium
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