5 February 2020

Around three million people are employed in the UK retail sector, making it a major part of the economy. But so far in 2020 we've seen the loss of nearly 10,000 jobs, with big names such as Debenhams, Mothercare, and Asda closing stores or announcing redundancies. Other retailers in trouble include Game, HMV, Arcadia, and Morrisons.
Shopping mall with few customers | Photo by Brett Jordan

2019 was the "worst year on record for retail". But it's not all doom and gloom as our colleague Kirsten Cowan, Lecturer in Marketing—whose research focuses on consumer decision-making—explains:

"In 2020 we will see some more retailers who fail, who can't adapt. But you will also see some figure it out, do really well, and succeed in the modern retail environment.

"In the past retailers could have a physical location, an online environment, social media, and catalogues, but today the consumer expects all these separate aspects to be in harmony, to have one voice. So whether you're going in store or online, you expect the same feel across different channels.

"Consumers want more convenience, they are time-starved. Convenience stores are doing really well, especially in the UK. Other retailers have opened up convenience store formats or smaller formats to appeal to the needs of consumers who live in urban environments and don't have a lot of time to shop.

"Consumers also want engagement and experience. How do you connect to them so it's not just a transaction? How do you create a hedonic, pleasurable experience?"

What is driving the shift towards retail as an experience?

"There's so much competition today—physically, there's so many shops, so many options. Online there's many options, so your competitors aren't local anymore, they're global. So many provide the same thing. What's a compelling reason for people to shop with you rather than others? One way is to create an experience.

"Options for retailers include a VR (virtual reality) experience, a demonstration, or an event just to get the customer engaged and to build a relationship. If you can create something fun, customers won't see visiting your store as a chore.

Perhaps what we need is an escape, from which we can derive real pleasure.

"Another thing driving the shift to experience is the time we're living in. Look at the political climate, the economic climate, concerns over illness—it's a little depressing! So perhaps what we need is an escape, from which we can derive real pleasure. For example, going to a sports store that has a rock-climbing wall, or an athletic-wear store that does yoga sessions after work. All of these help us escape the environment around us.

"Another key driver is the new generation—they've had constant experience with technology, from a young age they have had phones, computers. They've never really experienced boredom, they've never had to go outside and play and make believe. They've always been attended to. They want to be excited, thrilled. That is propelling that need for experience."

How can businesses adapt?

"Be proactive. You can't be fixed on what you are currently. I asked my students the other day whether they shop in department stores and most said no. How can you change the format of the stores to be relevant? How can you embrace the trend in what's happening? Gather intelligence from the customers themselves and from your employees, as they talk to customers.

"Empower your employees. Customers don't want decisions that take forever. They want immediate gratification. Look at online chat boxes—they work because they deliver immediate action. Prioritise research to understand what's happening. Research from different angles—look at sentiment and emotion when customers talk about you. These things don't guarantee that you will be successful, but will make it more likely."

How can retailers build customer loyalty?

"This is such a big question, especially given younger consumers as they are less loyal than Gen X and baby boomers. They are so much more fickle across brands and types of product. They will mix luxury and discount together. They are more prone to switching and retailers can't just offer the same loyalty schemes as before and try to lock consumers in. The airline industry is an example. Consumers today are OK with giving up those miles if they don't think they're beneficial anymore.

"Think about what is at the core of the business. What is it you are trying to do? Younger customers want to see you are making a difference in the world through sustainability or social impact, responsibility towards the environment or people. They want to see that at the core of what retailers are doing today. They can see through inauthenticity, so it's important to be authentic.

"It's also important for consumers to be heard. Whether they are interacting face-to-face or online it's important to respond in a meaningful way, and foster a relationship with them and grow it over time."

Finally, what's the role for policy makers such as local and national governments in ensuring retail has a future?

"There isn't an easy answer. We can't bail retailers out. Something the US has done to stimulate purchasing is dropping taxes on particular days, for example back-to-school time, encouraging parents to buy school clothes. You can reward retailers that invest in social or environmental causes. Also, prevent landlords from charging too much. That was cited as a reason for House of Fraser on Princes Street closing (by December 2017 its rent was almost £800,000 a year). Perhaps there could be a cap on rent or increases in rent?

"Policy makers should be mindful of destination retail—that is a big name shop that draws people to a particular area. If that shop goes, it has a knock-on effect on that whole area.

"Finally, encourage the development of small businesses. People like to shop local, there's a whole movement to shop local, especially in the UK. Encouraging that diversity should help the sector weather the ongoing storm."

Kirsten Cowan

Kirsten Cowan is Lecturer in Marketing at the University of Edinburgh Business School