A recent report by RELEX Solutions suggests that the majority of retailers feel that the UK retail market is more competitive than ever. E-commerce giants such as Amazon are posing a further threat to high street retailers who are already under pressure from the growth of online shopping and changing consumer habits.
In addition, recent PwC and the Local Data Company figures for shop closures suggest that the current competitive environment has hit bricks and mortar fashion and electrical retailers the hardest as consumers seek the best prices, want more out of their shopping experience and are favouring the convenience of online shopping.
The research report shows that 90% of respondents see Amazon as a significant competitive threat. Amazon offers music and video streaming services, speedy delivery methods, a Prime subscription package and, through its acquisition of Whole Foods in September last year, bricks and mortar grocery stores. It offers customers a more convenient shopping experience and has created loyalty that will be tough to break. A recent article in The Sunday Times suggests that Amazon plans to open Amazon Go stores in the UK – a checkout-free experience which will appeal to increasing consumer demands for convenience shopping.
So what are high street retailers doing in the face of this threat? The report shows that about a quarter of bricks and mortar only retailers are implementing an online channel for sales. 35% of respondents are increasing their focus on improving their operational efficiencies and 10% are increasing urgency and budgets for new initiatives. Nearly half of respondents assessed that technology is more essential than ever in the current competitive environment, but only 5% of retailers are considering increasing their tech budget. For the majority of retailers though, it is business as usual, with 78% of retailers focussing on their main strengths without planning major changes.
The shop closure figures suggest that the approach from retailers may be a complacent one. Improving profit margins through increased operational efficiencies and maximising existing strengths, such as the ability for customers to try goods before they buy, may help but retailers need to increase footfall in their stores. To aim to beat Amazon on price and efficiency would be to fight a losing battle. Retailers need to compete where Amazon and the likes can’t, such as offering a better in-store experience. More frequent store refurbishments, modern music and welcoming fragrances can refresh the current shopping experience. In-store evening events with classes, bars and concessions or centre-wide promotional events, such as the existing student lock-ins, can generate new customers and tempt existing customers back in-store. Harvesting more customer data can help to tailor the consumer experience, such as forecasting methods of payment, when customers visit and what they buy. Greater convenience can be achieved by enabling customers to avoid queuing by adding the ability for them to check-out items on their mobile devices. There is plenty of potential for innovation, and new initiatives will be key in fending off the ‘Amazon Effect’.