4The high street

Losing share of spend:16.2% to 15.7% of spend (2010-2014)

Though neighbourhood’s share of spend will dip slightly between 2010 and 2014 the long term trend is that there will be a resurgence in local shopping as consumers look for convenience and concerns about local sourcing and food miles grow. Chain stores and independents are improving shop fits and store environments to cater for growing local demand.

Gaining share of spend:31.4% to 31.7% of spend (2010-2014)

Out of town remains a convenient and popular channel for consumers. Retailers especially of big ticket items and home related goods will continue to open more stores in these locations as they provide ample space to display ranges effectively and rents are comparatively cheaper than high street locations.

Gone are the days when the high street was the main port of call for consumers shopping needs. In the early 90s around three quarters of all retail spend made in physical stores was carried out on the high street. Since then the proliferation of OOT centres has diverted some of this spend to the peripheries of town and city centres. By 2010 the high street’s share of physical store sales had fallen to 47.3%. Meanwhile the growth of online commerce over the last decade has seen the high street’s share of total retail spend fall from 49.4% in 2000 to 42.7% in 2010.

By 2014 we forecast that the high street’s share of retail spend will have fallen by a further 2.5% points to 40.2%, mostly at the expense of more sales going through OOT centres and online.

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High street losing its retail crownOther locations and channels are weakening the high street’s traditional dominance of retail

1994 2014

High street

Neighbourhood

Out-of-town

Non store

4.9%

23.9%

21.0%

50.2%

12.3%

31.7%

17.9%

40.2%

Percentage share of total retail spend by location

High street stores

Losing share of spend:42.7% to 40.2% of spend (2010-2014)

The high street will continue to be the largest retail location. However it will lose share going forward at the expense of other locations and channels. Migration of spend online for some categories such as music and video will see these stores gradually disappear from the high street.

Neighbourhood stores Out-of-town stores Non store

Gaining share of spend:9.6% to 12.3% of spend (2010-2014)

Retail spend through non store channels continues to grow, mainly driven by the growth of sales through the Internet. Improvements in online offers, greater flexibility in delivery and new technologies including smart phones, will make shopping more mobile and convenient and further drive more spend through non physical channels.

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Location changes

The high street has always been at the heart of most shopping trips and will continue to account for a significant share of retail spend. However retailers’location strategies are changing. Typical high street retailers are closing stores and consolidating their store estates as more sales go online. Other retailers such as Mothercare are moving to OOT retail parks, where it is easier and cheaper to open larger footprint stores. In terms of physical stores more retailers are now reaching the consumer through out of town and this is reflected in out-of-town’s higher average annual sales growth over the last decade compared to in-town locations.

High streets are the weakest retail location and have particularly struggled over the last few years due to their greater exposure to discretionary spend compared to out-of-town and neighbourhood locations, which generate a larger proportion of sales through food. In 2009 high street sales declined 3.6% following the collapse of major chains such as Woolworths, Zavvi and Rosebys. While the location fared better in 2010 with sales up by a marginal 0.2%, the growth marked the weakest uplift in high street sales since 1991.

Space continues to contract on the high street and has worsened during the recession due to vacancy rates rising significantly as weaker players dropped out of the market. Between 2000 and 2009 space on the high street declined by 8.9%, this compared to growth in out-of-town space of 34.0% over the same period. Looking ahead, high street space growth is set to decline by 4.0%, while out-of-town will grow by 4.8% as major retailers scale back on high street stores opting instead for out-of-town sites, which have comparatively lower rents per sq ft. Bigger stores located out-of-town allow space for better merchandising and also provide parking facilities (often free of charge) close to store, a factor that is becoming increasingly important with the growth of Click and Collect services.

High street underperforming other locations

Average annual retail growth and forecasts across shopping locations

Out-of-townstores

High streetstores

Physicalstores

Neighbourhood stores

+2.4%

+1.5%

+4.4%

+2.3% +2.1%

+1.4% +1.3%

+0.8%

2000-2009

2010-2014

Space growth and forecasts Out-of-town vs. High street

2000-2009 2010-2014

Out-of-town High street Out-of-town High street

+34.0%

-8.9% -4.0%+4.8%

0

200

400

600

800

1,000

1,200

1,400

1,600

2010 2011 2012 2013 20140

10

20

30

40

50

60

70

80

90

Online share Store numbers

6,000

6,100

6,200

6,300

6,400

6,500

6,600

6,700

2010 2011 2012 2013 20140

5

10

15

20

25

30

35

40

45

Online share Store numbers

Music & Video Electricals

38,500

39,000

39,500

40,000

40,500

41,000

2010 2011 2012 2013 20140

2

4

6

8

10

12

14

Online share Store numbers

14,400

14,420

14,440

14,460

14,480

14,500

14,520

14,540

14,560

2010 2011 2012 2013 20140

1

2

3

4

5

6

Online share Store numbers

Clothing Health & Beauty

Stores on the verge of a tipping pointHigh street configuration will adapt as spend in some sectors increasingly moves online

The future configuration of high streets will inevitably be impacted by the growth of online commerce. While the internet’s share of retail spend is rising across all sectors, the rate at which it is eating up share varies considerably.

The stores that are most likely to disappear from our high streets are the ones that are losing most share to online. With the digitisation of multimedia content, the ease of price comparison and the general convenience of online, there will be less need for stores whose propositions are centred on technology and entertainment products, which will lead to a big drop off in the number of Music & Video and Electricals stores in high street locations over the coming years.

Meanwhile clothing will continue to be prominently shopped for in physical stores as consumers like to try on items before they buy. Health and beauty stores will always have a place on the high street as many have diversified their offer to include services such as manicures, hairdressing and other types of activities that can’t be provided online.

Store numbers and online share of sector retail spend. Figures of the left axis (blue line) indicate number of stores. Figures on right axis (red line) indicate % of online share of retail spend in sector.

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What was once primarily a retail destination will gradually shift to become a place more for social and leisure activities and a hub for localness

The future of high streets

The wired high street – As smart phone usage really picks up and the high street becomes more leisure oriented, wi-fi will become more in demand as consumers spend more time socialising in the town centre. Coffee houses have offered free wi-fi for years and now some retailers such as Tesco and O2 are beginning to offer it in their stores. A shared free wi-fi service could be offered on high streets. Retailers and other tenants could work in collaboration with local councils to provide the service and use location-aware technologies to send targeted offers and discounts to customers for different stores as they stroll along the high street.

The unique and innovative high street – While the clone town Britain label has been doing the rounds for years, we could see a reversal in this area as high streets become more tailored to local interests supporting local sourcing and local entrepreneurs to offer a more diversified and compelling shopping experience than out-of-town retail parks and malls. Pop ups and innovative independent boutique style stores could become more prominent.

The social and leisure high street – As a greater proportion of retail spend moves online and to out-of-town locations, the role of the high street is set to change, moving away from being predominantly a shopping destination to a more leisure-based centre. Coffee shops and restaurants will continue to increase their share of space on high streets to cater for the social spectrum. Retailers that remain on the high street are likely to become collection centres for online orders or act as marketing tools to encourage customers to try products before they buy online.

In next few years high streets across the UK are likely to see significant changes. While there are likely to be variances depending on different locations in terms of regions and whether they are secondary or tertiary, there are a number of aspects that are likely to become common place across high streets nation wide.

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