Despite the proliferation of CVAs and store closures washing across the high street, physical stores will continue to be a valuable channel for retailers as the vast majority of purchases are still made offline.
According to recent figures from GlobalData, online sales are continuing to grow but with more than 80% of sales still made in stores, they will remain a vital complement to online activities.
“While online sales have grown at a fast rate, rising 60.9% between 2012 and 2017, physical sales still dominate the retail landscape for many sectors and these are an invaluable brand touchpoint for many retailers, despite rising operating costs and declining footfall,” said GlobalData retail analyst Charlotte Pearce.
Physical stores also contribute to spend via the online channel through click & collect sales, as well as sales of products where shoppers have browsed instore before buying online. Stores are often the most convenient way to pick up low value items of an essential nature or to browse and purchase big ticket items which shoppers feel more comfortable buying instore.
However the essential nature of stores does vary across sectors. In food & grocery and health & beauty, online has very little penetration meaning stores are more important and store closures have been lower in these sectors so far this year. However electricals and clothing & footwear, benefit more from higher click & collect and online store-influenced sales, therefore brands operating in these sectors are more at risk of CVAs as increasing online sales are eroding store sales, according to GlobalData.
In the fashion & apparel space this year, New Look has entered a CVA (Company Voluntary Arrangement) and is closing 60 stores, Select is operating a CVA but is closing no stores (it is however seeking rent reductions) and baby and maternity retailer Mothercare has had its CVA approved. All eyes are now on House of Fraser, which is apparently struggling to convince its creditors of the merits of its CVA proposal, which some sources say could lead to it closing around half of its near 60 stores.
Another recent trend, which confirms the value of the store, is online businesses opening physical stores. Yesterday Joe Browns said its first physical store in Sheffield’s Meadowhall had racked up sales of £1.25m in just seven months and had driven significant traffic to its website. It now has plans to roll out further stores.
French online brand Sézane is soon to open its first permanent store in the UK, in London’s Notting Hill, following a successful pop-up before Christmas and online fast fashion brand Missguided has ambitious physical retail plans having opened stores in Bluewater and Westfield Stratford.
Also at Westfield Stratford is Zara’s new, world-first omnichannel store format combining the benefits of online and offline shopping with a dedicated click & collect point and the ability to order online products in-store, along with self check-outs and other experience-enhancing technologies.
GlobalData agrees that the Zara model is one other retailers need to be considering as they assess their retail estate. “Retailers must continuously look at rationalising their store portfolios as online sales continue to grow and ensure the remaining branches are real destinations for those who wish to browse products and convenient locations for online shoppers wanting to collect instore,” said Pearce.