Comment: delicately balancing online and offline
In the early days of e-commerce the senior executives at John Lewis acknowledged that their tardiness at opening physical stores was something of a godsend because it meant they were less affected by the rise of online sales compared with other retailers that had amassed extensive store estates.
Fast forward to today and the acknowledgment from senior management is that they now have far too much physical space. This suggests there has been some serious mismanagement of the balance between online and stores over those intervening years. What happened in that period is that the likes of John Lewis, Debenhams and House of Fraser continued to be prized anchor tenants of new shopping malls and on the back of peppercorn rents were tempted to open far too many large outlets.
Meanwhile, online sales continued to rise and the ability of consumers to shop across all categories online sucked the value out of physical department stores. Among the bunch of national chains John Lewis does at least still survive but like every other retailer out there the management of the delicate balance between its online and stores-based businesses is proving a major challenge.
At a recent event held by Xpedition, the retail guru Mary Portas was clear that the reality for most retailers will be “less physical space but better” going forward. This involves more experiences being incorporated into stores and there being less of a focus on simply flogging stuff.
We’ve just had the announcement from outdoor clothing and accessories brand Arc’teryx that it is significantly upsizing its Covent Garden store in order that it can “fully immerse our guests into an elevated experience of our brand”. This basically means the new store will be able to house a wider range of products and services including its circularity programme that focuses on care and repair as well as up-cycling of its products.
Such a move is not unusual as these well-known brands recognise the value of having a smaller number of seriously sized flagships rather than a sprawling portfolio of smaller outlets that fail to deliver fully on the brand experience. The country’s premier shopping centres have found that many of their key tenants have been following this playbook and in some cases have seen the new super-sized stores being multiples of the square footage of the original unit.
The other trend for shopping centres is that they are no longer wedded to the old strategy of going after those big name retailers as anchors but are starting to instead take a more creative approach involving the consideration of the likes of skate parks, youth clubs and urban farms. This suggests a more community-focused strategy and it is these non-retail elements that will add cool to the historically rather one-dimensional shopping centre environments and prove a strong draw to the big brands to come on-board and attract more customers.
This all contributes to a constantly changing dynamic around physical retail space. But what is certain is that the bricks and mortar store is as crucial as it has ever been in the world of retail. In only the past week both Selfridges and Jigsaw delivered results revealing that they have enjoyed a rebound in sales over the past year that has brought their trading levels close to those recorded pre-pandemic.
Needless to say these figures will be unlikely to give management the confidence to suddenly gun for more stores. The days of simply rolling out more outlets as a driver of sales are long gone. The physical space now has to be handled in close conjunction with the online operations, which is something John Lewis is now all too aware.
