Opening new retail space in a post Covid-19 era
By James Hay, Managing Director, Barrows London
Covid-19 has brought immediate and lasting change, causing retailers to re-think virtually every aspect of their business from hygiene through to the customer experience, the role of physical stores, as well as the integration of channels.
In this article, I breakdown Covid’s impact on new store openings over three phases: the initial reaction, the adjustment period (which we believe we are in now) and the longer-term changes.
Safety first - the initial reaction
When the coronavirus swept the globe earlier this year, retailers scrambled to find quick fixes to make their store environments Covid secure. During that time, we were just weeks away from opening a brand new store format for Holland & Barrett in Chelmsford, Essex.
We had to react quickly, ensuring that safety measures were properly baked into each touchpoint along the path-to-purchase, from a temperature scanner at the entrance to touch-free sanitising stations throughout the store, to ensure shoppers and store staff felt safe in the new environment.
Our guidance to clients today is that safety and hygiene has to be at the forefront of the design to be truly effective and cannot simply be a final overlay.
Adjusting to the challenges and opportunities
As retailers adjust to the pandemic, a relentless obsession on the customer experience is essential to ensuring sustainable success. This means reacting at pace to evolving customer preferences and new pain points created by the pandemic. For example, queueing at the front (and even outside) of the store has become commonplace.
Holland & Barrett were quick to identify this pain point, partnering with Mercaux to enable shoppers to browse products, and create a basket, all while they queue before entering the store. The customer then picks up the pre-packed order at the front of the store, saving time and reducing the risk of infection.
There will be many ways for retailers and innovators to maximise the opportunities created as new habits are formed. It is essential that retailers show real empathy and curiosity, so as to avoid assuming that stores designed to suit previous patterns of behaviour will remain effective in the short and medium-term.
Looking to the future - the lasting changes
There has been a steady torrent of negativity on the future of physical stores in light of the explosive growth of e-commerce over the past six to seven months.
“The great acceleration brought about by Covid-19 will lead to one of the most exciting periods of change in retail as retailers look to radically re-imagine the way in which shoppers interact with their brand and purchase products”
It is inevitable that there will be a sharp contraction in the number of shops in the UK as a result of the speed of change (not to mention the additional costs of hygiene through the pandemic). However, we believe that this could present opportunities for physical stores over the long-term.
We are likely to see a reset in the economics of a physical retailer, with substantially reduced rent and potentially even business rates as well. As an example, Next boss, Lord Wolfson, recently stated that during lease negotiations with landlords, the retailer has reduced rents by 50% on average so far this year and that Next expects to shave £9.9 million a year off its rent bill.
One approach proving popular is fewer, better stores, with a focus on integration across channels. In June, Zara announced plans to close between 1,000 and 1,200 smaller stores, investing €1 billion in its online offering by 2022 and a further €1.7 billion in the remaining store estate to allow them to integrate better with websites for faster deliveries and real-time tracking of products.
As advertisers continue to move their spend down the funnel to conversion-driving tactics, we also believe there is an opportunity for retailers to offer dynamic, localisable and ultimately, personalisable digital content in the physical store.
This opens up new revenue streams for retailers and increasing the effectiveness of traditional Point of Sale materials - pointing to the success of Barrows own ‘Connected Store’ model, which is currently live in hundreds of stores across South Africa, including Spar and Pick ‘n’ Pay.
I do not believe that integration will be the only change to the physical estate. As physical stores struggle to match e-commerce on price and convenience, I expect many of them to turn up the dial on entertainment and in-store theatre as a means of driving engagement and bringing customers back.
The great acceleration brought about by Covid-19 will lead to one of the most exciting periods of change in retail as retailers look to radically re-imagine the way in which shoppers interact with their brand and purchase products.
