Majority of retailers say stores are just as if not more important to their business

Despite reporting further store closures in 2020, almost two fifths (38%) of UK retailers say stores are becoming more important to their business as they change how they use those stores. 

The vast majority (82%) say stores are just as if not more important and 69% would describe their online and offline channels as “interdependent”. 

The findings come from an in-depth report by TLT, Mission Impossible: reconfiguring stores for the modern consumer, which is based on interviews with 100 of the UK’s top retailers and looks at the impact of retailers’ future store plans including on technology, landlords and jobs. 

From shopping to experience 

While retailers have talked about creating more of an experience for customers for some time, this is now one of the top three drivers of future store plans (64%) – indicating that the kind of experience you provide is now just as important as having the right product available at the right price. 

Shoppers will be able to complete multiple missions in one location with retailers offering multiple services – either directly or by co-locating with other brands – in addition to selling products. The most popular services will be expert advice and consultancy (64%), food and drink (48%), health and beauty (46%) and product rental (44%).

The most popular non-retail service varies by type of retailer: food and drink services for food & grocery (90%); health and beauty services for fashion & beauty (60%); and expert advice and consultancy for home (75%) and leisure & lifestyle (67%). 

Retailers are more likely to increase than decrease the number of stores they operate across the UK, with 46% saying they will have less in the coming years. This rises to 50% for grocery & food and 55% for fashion & beauty. The biggest gains will be seen in the South West, Scotland and Northern Ireland, with the biggest losses happening in the North West, North East and London.

Yet three quarters (75%) of retailers say their stores will remain the same size or expand, allowing more space for urban warehousing and complementary services. 

Tech trends 

Retailers will also modernise stores by investing in technologies that can help fulfil their objectives of increasing footfall and customer spend and giving customers more of an experience.  

Retailers plan to invest more in the following technologies than they do currently: 

• Virtual mirrors (46% already or planning to use) 
• Virtual reality (44%) 
• Facial recognition technology (36%)
• Robot assistants (33%)
• Biometric payments (32%)
• 3D printing (29%)
• Checkout-less stores (28%)

While retailers recognise the potential for facial recognition technology to be used to improve customer data capture (60%), in-store experience (52%) and crime prevention and detection (43%), they also recognise some significant challenges with the technology, not least data privacy and protection (88%), data security (84%), negative publicity (75%) and customer resistance (66%). 

Automation and jobs 

Retailers’ experience of customer-facing in-store automation to date has been “mixed” (31%), but they plan to invest in it further. The areas most likely to be automated include suggesting items based on a shopper’s previous purchases (70%), stock management (67%), answering shoppers’ questions (60%) and directing customers to the right part of the store (59%). 

While only a fifth (22%) of retailers currently use self-service checkouts, predominantly in the grocery & food sector (90%), this is expected to grow to 47% overall and 53% for fashion & beauty. 

Consumers are also struggling to adapt to automation, with 42% of those that have experienced in-store technology and automation describing their experience as “negative”. Consumers are against automating areas that retailers are investing in the most, meaning retailers will need to consider how they communicate these changes and carefully manage the design and roll-out. 

Despite the growing use of automation, the majority (69%) of retailers say humans will remain critical to in-store customer service. However, 40% say they will need less staff in the future, 56% say they will need to create new roles and 67% say in-store staff will require a different skill set. Communication (86%), product knowledge (79%) and customer relations (77%) are the skills most likely to grow in importance due to the way that stores are changing. 

Perran Jervis, partner and head of retail and consumer goods at TLT, says: 

“Make no mistake; stores will continue to be a vital part of the retail economy in the coming years. But retailers know that stores can’t survive in their current format. Their purpose and configuration needs to evolve more quickly if they are to survive in conjunction with and not despite digital channels. Some retailers are using social to direct people to a physical store not a website.

“The way we behave as consumers is changing, whether that’s the ease with which we shop across different channels or the best ways to capture people’s imagination and win preference. This is increasingly influenced by the sort of offering you have in-store: does it work with your digital channels and are you offering people what they are looking for on the high street? 

“Technology will be key to reinvigorating stores and making them work efficiently, but digitisation can be very disruptive – for business, staff and customers. There are various risks that will need to be managed, from IT procurement through to data privacy and cybersecurity. Retailers will need to become accustomed to the impact that technology-driven change has to ensure that this can continue to drive improvements whilst maintaining an upwards growth trajectory.”

Research methodology 

To gain a sector and category view of the retail sector, independent research was conducted by GlobalData on behalf of TLT LLP. 

GlobalData interviewed 100 leading UK retailers. In all cases, interviews were carried out with senior management. The sample was representative of sectors within the retail space including: food and grocery; fashion and beauty; home sectors; and lifestyle and leisure. 

To compare the retailer’s perspective with the consumer’s, GlobalData also interviewed a representative sample of 2,004 UK consumers.