The media is very pessimistic about the high street at the moment; with an uncertain Brexit looming, business rates rising, online retailers stealing market share, big names being put into administration and interest rates increasing, the press are already writing the high street’s obituary.
The BBC examined what went wrong on the high street in 2018 while The Guardian was writing about a retail apocalypse. It’s understandable. With big names like Maplin and Toys R Us entering into administration in 2018, the trend is worrying for retailers.
But the ‘high street’ is a huge sector encompassing a range of retailers from small organic coffee shops to huge multinational chains and although there are worrying trends, different types of businesses and different regions have hugely varying outlooks.
Let’s look at an example.
North West Bar and Restaurant Scene
Brought into national focus by the hit BBC show My Million Pound Menu, the North West has a burgeoning bar and restaurant scene. In Manchester there is a raft of high-profile openings planned for 2019, and Red Flag Alert data shows that there was a 9% increase in bars and restaurants opening in the North West between 2017 and 2018.
While there was a significant 37% increase in bars and restaurants being dissolved, many businesses in the sector thrived. While average and poor performers are struggling, the best entrepreneurs in the sector are thriving and reinvesting in new models that they know work.
Time will tell how the sector evolves but an uptick in quality, an increase in openings and a large culling of the businesses that don’t perform can lead to a very strong sector.
Mark Halstead, Partner at Red Flag Alert, looks forward to 2019 for the North West bar and restaurant sector.
“There is a lot of activity in the sector – with a high turnover of restaurants and a large amount of investment, competition is fierce and demand is high. This trading environment drives innovation and imagination – businesses that can give a fantastic customer experience can thrive.
‘Tast Catala’ is an example of the level of innovation in the North West at the moment. A Catalan concept spearheaded by the successful Fazenda restaurant group, and intriguingly Pep Guardiola, offers a range of Catalan food and wine – a great example of entrepreneurship and innovation.”
So while the doom and gloom isn’t entirely misplaced, a closer look reveals an innovative sector with a large number of success stories.
Hope for the High Street
The high street is a very difficult place to succeed at the moment – this is undeniable. Between 2017 and 2018 dissolutions in the sector increased 55% and a lot of big names came tumbling down. But it’s important to distinguish between terminal decline and a change in the market.
As with the bar and restaurant sector, external pressures are forcing businesses to re-evaluate their strategy and come up with better retail experiences for customers.
There were 26,549 more retailers in the UK at the end of 2018 compared to the same time in 2017. New businesses are willing to step into the retail space and make it a success. With the future potentially bright, but definitely uncertain we asked Mark Halstead to give his views on 2019:
“The retail sector is here to stay; online will continue to take away some market share and average retailers will need to innovate to keep and win customers. There are a few reasons that there is hope for the high street to emerge stronger than ever.
Firstly, people want to go out and spend money but their expectations are changing – they want a great experience.
Lush Cosmetics is an interesting example of a retailer that has successfully innovated in different ways; they offer an innovative till system that reduces friction for customer transactions, a perpetually strong brand message, staff trained to personalise assistance, an engaging store layout and the ‘Lush lens’ that allows customers to use their phone camera to learn more about a product.
These innovations make the customer journey unique. They’re getting more than a product, they are getting an experience.
Certain products lend themselves to being purchased in-store. Clothes immediately spring to mind. Clarks do a great job in the children’s shoe sector with in-store fittings and a wide selection. So while many products are well suited to online purchases, many aren’t. If retailers can find a way to add value through in-person purchases there is a great opportunity to differentiate.
Finally, big tech companies like Apple, Amazon and Google are making investments in retail. Apple has long seen the value in having stores to build its brand, Amazon acquired Whole Foods after seeing the potential in the high-end supermarket chain, and even Google is looking to experiment with retail locations.
“The high street isn’t going to die but it is going to evolve heavily and it’s likely that innovative, well-thought out business plans can absolutely thrive in the new ultra-competitive world.”
Don’t Leave Anything to Chance – You Need Red Flag Alert
Overall, at Red Flag Alert we’re very optimistic about the future of the high street. but undeniably there will be many more casualties as the marketplace evolves. If you’re a business affected by the retail sector and especially if you’re in the direct supply chain you need to be proactive with your business monitoring. Big retailers going into administration can start a chain reaction that affects dozens of other suppliers, many of which will also face insolvency.
Red Flag Alert allows businesses to monitor the financial health of its customers in real time. With financial health ratings that are predictive of insolvency, monitoring can alert you in plenty of time to take action.
For a free consultation on how Red Flag Alert can help you manage risk, why not sign up for a free trial today?