Spotlight: Retail Revolutions

Retail Revolutions
 
Market drivers and the place of the shop

27 September 2016, by Tom Whittington

The store remains the focus of the retail experience

 

It has been a relatively good couple of years for fashion retailers given the tumultuous times experienced since the global financial crisis. Having said this, the sector has faced considerable headwinds over the course of 2016, amplified by the potential risks posed by the Brexit vote.

Despite these potential risks, over the longer term, further growth is anticipated as per-capita retail spend on clothing and footwear is yet to reach pre-recession levels. UK clothing expenditure in 2016 is estimated at £44bn, with growth of 26.5% anticipated by 2021; an increase of almost £12bn (although this is without factoring in possible disruption following the Brexit vote).

FIGURE 1

Size of the UK clothing market 2016

 
Figure 1

Source: Verdict

Online retailing does figure in this sales figure, however, it has been less of a threat than anticipated and instead provides a clear opportunity for retailers to extend their channels and showcase their offer. For example, 55% of consumers research online for purchases that are eventually made in store and 75% still prefer to try on clothes before they buy them.

The shop therefore remains as relevant as ever, with savvy retailers increasing revenues thanks to an online presence. According to a recent report by Verdict, a total of 89% of UK retail sales have ‘touched’ a store, from a combination of store sales, click and collect, or in-store browsing/research. The uplift equates to 9% of all retail sales; almost as much as that accounted for by online sales alone.

This boost varies across sectors, but is +10% in the clothing and footwear sector and +16% in the department store sector (see Figure 2). Furthermore, there is an anticipated halo effect where online sales are increased due to the brand awareness gained from having a physical presence. This is something that has not gone unnoticed by several pure play retailers who are now developing a physical presence.

FIGURE 2

The True Value of Stores

 
Figure 2

Source: Verdict

Verdict anticipate that physical store sales will increase by 11% over the next five years to £151bn, during which time click and collect sales are expected to more than double and the browsing/inspiration element is forecast to grow by store37%. This would leave the ‘True Value of Stores’ at £171bn by 2021.

So, while online is anticipated to account for a larger proportion of consumer spend over the next few years, the reality is that the two elements of in-store and online have become blurred, with both being increasingly reliant on one another for achieving optimum performance.

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Key Contacts

Tom Whittington

Tom Whittington

Director
Retail Research

Savills Manchester

+44 (0) 161 244 7779

 

Marie Hickey

Marie Hickey

Director
Commercial Research

Savills Margaret Street

+44 (0) 20 3320 8288

 

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