But new technology and a focus towards an innovative shopper experience can make 2020 an exciting time for creative retailers. So what is in store for 2020?
Mixed consumer spending
With one in 10 British employees working in retail, the sector generates annual sales of about £358bn.
UK consumer spending grew 1.5% in 2019, but the Centre for Retail Research predicts growth in 2020 of 0.8%. This is in part a reflection of the global economic downturn and the resultant slowing of trade of manufactured goods, with the ongoing China-US trade war a major factor.
The combination of these global factors, Brexit uncertainty, a lack of consumer confidence and high rents has resulted in a glut of high street casualties: Jessops, Clintons, Mamas & Papas, Mothercare, Bonmarché, Bathstore, Debenhams and Select are among those that shut some (or all) of their branches, or entered company voluntary arrangements (CVAs), in 2019.
Brexit uncertainties to continue
The majority of British business leaders remain cautious as prime minister Boris Johnson begins trade talks with the EU following the UK’s official withdrawal on 31 January.
“Retailers have done their best, but they still do not know what form of Brexit will occur,” says the Centre for Retail Research. “In the early months of the UK-EU trade negotiations, we expect shoppers to be very cautious, but if the world they see is little different from the one they knew before, they should start spending from about April 2020.”
However, uncertainties remain over import and export tariffs and a proposed points-based immigration system that will severely impact the employment of EU workers.
Continued pressure on rates
Rent and rates look set to continue to challenge retailers in 2020. In the past two years, landlords have increasingly offered struggling retailer tenants CVAs as a solution workable for both parties – but according to PwC, over half have been unsuccessful, and the sobering lessons learned mean fewer retailers may be tempted down this route in 2020.
In November, Boris Johnson made a pre-election pledge for what he called a “big review” of business rates in 2020. But Mike Cherry, national chairman of the Federation of Small Businesses, fears that a review could take up to five years, adding that rates hit retailers “before you even turn over your first pound, let alone make any profit”.
Further demand for online
About 20% of UK purchases are made online, with Amazon accounting for £4 of every £100 spent in the UK in 2019. But the trend is expected to soar over the next decade as people of all generations embrace the convenience of online shopping.
“Even the older generation are choosing to branch out to online shopping because it is easier, and in some cases quicker, than visiting the high street,” says James Bentley, UK strategy director at internet marketing company Awin. “But that doesn’t automatically mean the high street should suffer. Bricks-and-mortar stores’ increased use of features such as click-and-collect can encourage higher footfall.”
Greater emphasis on sustainability
Consumers are choosing products and retailers based on more than just price and convenience – and concerns around the environment, sustainability and labour will continue to influence their choices in 2020 and beyond.
ITE Group has found that retailers plan to increase the percentage of sustainable products they offer by 33% in 2020. Some retailers are attracting custom by encouraging consumers to work with them on sustainability – such as Scottish chain the Isle of Skye Candle Store, which offers discounts and loyalty points to customers who return their used tin and glass candle holders to be cleaned and refilled.
“A focus on more sustainable models of consumption is creating opportunities for new brands, services and platforms to emerge focused on re-commerce and thrifting as consumers look to recycle and reuse the products they buy,” says Deloitte’s Retail Trends 2019 report.
Pay as you shop to take off
Retailers will become ever more flexible in how they take payments, which not only gives customers a choice but potentially entices them to spend more. Aside from accepting payments via mobile phone and contactless debit and credit cards, stores are offering shoppers ‘buy now, pay later’ arrangements on everything from haircuts to the weekly shop.
Tech firms Klarna and ClearPay all offer stores systems that do an immediate soft credit check, which, if passed, enables the buyer to spread the cost over regular interest-free instalments.
Continuing developments in tech
From payment services to back-office data analytics, technology is revolutionising the way we shop. But it’s the customer experience tech that will attract shoppers into bricks-and-mortar stores.
One highlight to expect in 2020 is the rollout in clothes store changing rooms of Mastercard’s smart mirror, which ‘recognises’ all the products a shopper takes into a changing room, recommends similar styles and dispatches an assistant to get them, and then gives customers an option to buy there and then, without the inconvenience of queuing for the till.
Till-free shopping will also become more common over the next couple of years – although it may be a little while before most shops can provide the experience of the AmazonGo grocery store in Seattle, Washington, US, which has payment system so sophisticated that customers can simply pick up a product and walk out.
Experiences become mainstream
Deloitte predicts a future of “fewer, better stores”, adding: “With smaller portfolios of stores, retailers will be able to invest more to ensure those stores meet the needs of their consumers. Many are taking the opportunity to reconsider the role their physical stores play in delivering the overall customer experience.”
More and more stores are thinking creatively. John Lewis, for instance, has invited customers to a sleepover to try out its beds, while at cosmetics brand Lush, high-energy staff make shopping more interesting by regularly encouraging customers to interact with products by, say, detonating bath bombs in a riot of colour and noise.
