Update on UK retail
Growth of Click and Collect/ The bridge between ‘Real World’ & Digital Operations
There is no doubt that retail is an ever changing sector and the format of the traditional approach has changed to meet the challenges of the sector. The digital revolution continues unabated with new approaches to online technologies.
Click and Collect has grown significantly and been hailed by both retailers and consumers for providing the convenience of online shopping and is seen as the solution to issues which customers have experienced in taking delivery of goods. In December 2015, the retail giant John Lewis revealed that the service has overtaken home delivery for the first time.
Refurbishment / New Store Developments
2016 is likely to be a year of consolidation for the big four supermarkets with growth in new developments remaining low. Food discounters and budget retailers will continue to take share from the big four supermarkets because of their increased availability to consumers via new store openings.
As the big four supermarkets adjust to low and negative growth, in some cases it seems likely that their capital expenditure will become more focused on capturing areas of expected growth such as Homeware, Furniture and Health and Beauty, by improving the existing offerings in stores with small to medium refurbishments.
The clothing sector is expected to see growth in 2016. The value retailers should continue to thrive and will drive footage growth. The established high street general merchandise retailers are likely to see their growth coming from the online businesses supported by physical stores which they continue to refurbish.
Key to capital expenditure will be continued consumer confidence. Global economic volatility in early 2016 will continue to present a challenge in terms of consumer confidence. Long term growth plans seem to be on the agenda for retailers in 2016 with some estimates on retail leases indicating that 50% of leases are due to expire by 2018-2019. If accurate this will mean that many retailers will be evaluating their short to medium term plans.
Convenience / Small Format Store Development
The UK’s convenience store portfolio has expanded rapidly with openings exceeding closures. They offer customers a wide variety of items at consumer-friendly locations. Sainsbury’s already has more convenience stores than supermarkets and Tesco already has more than 1,600 branches of Tesco Express.
Finding optimum locations remains the key challenge as well as competition from the discounters. 2016 is likely to see a stabilisation of this sector and unlikely to meet the like-for-like growth of recent years.