Saturday, 21 May 2011

The Future for Retail

A couple of weeks ago David Cameron employed 'Queen of Shops' Mary Portas to help work out a way forward for the 'British High Street' and the future of retailing.

What a waste of time. If only he had taken a quick trip down the motorway to Education Secretary Michael Gove's Surrey Heath constituency he could have spent a couple of hours seeing both the future of British retailing and the limits to Portas's vision (the subject of a future post).

Camberley, the main town in Surrey Heath, has recently seen a major redevelopment of one of the two main streets which had fallen into a poor state as retail stores declined over the last few years.

The main street was pedestrianised and a large shopping centre style development with a large volume of housing (mainly flats) was built in place of the old shops and car park area.

The main retail development exemplifies the story of the future. It contains around 20 outlets but not a single one is a shop. The development consists entirely of cafe's, restaurants and bars surrounding a bowling alley and multiscreen cinema complex. The adjoining street has a limited number of major brand stores while the main shopping area is in the old adjacent shopping centre. The new complex is a leisure destination, rather than a shopping centre - a crucial key to the future.

20 years ago I worked for the UK's largest Apple franchise. At the time, Apple sold via mail order via a large number of resellers and via retail. The retailers played a crucial role in Apple's marketing strategy as they provided a location based opportunity for potential customers to come to try and learn about products before they bought. The company I worked for had multiple retail outlets 'Applecentres' and office based sales teams, including the one I ran, who sold direct to businesses and used the 'Applecentres' as 'demonstration' facilities.

But there was a problem. Apple resellers who did not have the high overheads that were borne by Resellers who operated 'Applecentres' were able to undercut the prices of the high overhead resellers - they operated from low cost premises and didn't need to employ retail staff. Applecentre based resellers complained that they were doing the selling and the then low overhead resellers were fulfilling the business.. The apple centres were doing the work and then the others were taking the profits.. Not good.

Apple centres started to close and fewer people got the chance to see, touch and try Apple products and so eventually fewer later bought them.

Apple finally got the message and realised what was happening. It forced them to evaluate the benefits of having retail stores and to understand that their products needed to have retail exposure - a crucial part of the buying process was the customer visiting a store and touching, trying, feeling and connecting with the product. The mail-order outlets and later Internet outlets didn't generate demand, they merely fulfilled it.

Apple responded by increasing the margins of Applecentre based resellers and reducing the margins of mail-order or Internet based resellers. In other words, Applecentre based resellers could buy products from Apple at lower prices (3-6%) than other resellers. It worked.

20 years later, Apple have made a fine art of retailing. Apple Stores are retailing phenomena and they look fabulous (no pile em high sell em cheap, fab bargain signage here) yet only a small proportion of the products that Apple sell are actually bought in an Apple store.

But who cares. The purpose of the Apple Store is a location in which to showcase a product as much as to actually sell it.

And that, I suspect, is the key to understanding the future of retail. Large towns need to do what Camberley has started to do, and embark upon plans to develop their retail centres as 'destinations' where people come to enjoy their leisure time - have a meal, watch a movie, look at some new products, and perhaps, but not always, buy them.

Retailers who understand the value of showcasing their product in such places will populate these retail centres. The Internet need not destroy the British high street but it will mean it needs to be remodelled to take account of the future purpose of retail.

So that is a simple vision for the future of retail in Britains towns but what of the larger villages that are to small for this kind of development. Again, Surrey Heath provides an example of the future - the subject of a future post.

- Posted using BlogPress from my iPad


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