Last week, Microsoft announced plans to open a new flagship 21,932 square feet store in Oxford Street, London. The tech giant’s first UK retail store is set to open on July 11, 2019, and comes at an uncertain time for the British high street. The high street is currently losing stores and jobs at a faster rate than the 2009 recession, with Dunelm the latest chain to issue a profit warning, citing ‘challenging’ conditions. With the collapse of BHS last year, and the serious issues facing major high-street brands such as Marks & Spencer, Debenhams, Topshop and House of Fraser, the British high street appears to be in terminal decline.
Why is the High Street in Crisis?
The decline of the British high street has been gradual, but apparently inexorable, with retail giants such as Toys R Us, BHS and Woolworths disappearing permanently, and British institutions such as Debenhams and House of Fraser tottering on the brink of collapse.
There is no question that online has decimated the high street, with digital business able to out-perform and out-price their retail counterparts by avoiding expensive overheads such as rents and high business rates. Indeed, online has taken about a fifth of all retail spending, and with the rise of mobile, that trend is only set to continue.
A recent survey by YouGov showed how consumers are losing faith in the major high street brands, with brand health metrics such as Impression, Quality, Value, Satisfaction, Recommend and Reputation all declining since 2013. The retailers which recorded the largest drops in quality perceptions, Toys R Us (-8), Maplin (-4), Homebase (-4), WH Smith (-3), and House of Fraser (-3), have all suffered either severe financial difficulties or permanent closure.
Rising Costs and Changing Spending Habits
The rise of online is not a new phenomenon, however. This is a reality that retail businesses have had many years to adjust to, and yet we now appear to be seeing an intensification of the high street crisis when perhaps we would expect businesses to be evolving to meet the challenges posed by online shopping.
Unfortunately for retail, they have other problems to contend with, such as rising costs and changing consumer behaviour. The ongoing uncertainty around Brexit has not helped the high street. The value of the pound has tumbled, increasing the cost of importing items from abroad. The rise in the minimum wage and increased business rates have also hit many retailers where it hurts.
Elsewhere, we may be seeing an evolution in consumer spending, away from spending money on ‘stuff’ to ‘experiential’ purchases. Data released by Barclaycard reveals that last year spending on entertainment was up by 10%, while spending on pubs and restaurants also increased by a similar percentage. However, spending on women’s clothes actually decreased. Data from Visa revealed a similar story: spending on restaurants, hotels, pubs and bars all increased, while household goods and clothing spending was down.
Apple and the Experience Economy
Clearly, the high street is experiencing an existential crisis, and it is no longer inconceivable that even the most established brands such as Marks & Spencer and John Lewis may one day disappear from our towns and cities altogether. However, there are some brands have embraced traditional retail, and transformed it into something else altogether.
Apple is the world’s most valuable brand, a company at the forefront of digital and technological innovation. It is also the proprietor of one of the world’s most successful retail outlets, the Apple Store. Anyone who has entered a shopping centre in Britain or abroad, and has walked past an Apple Store will know that they have no issues with footfall, the stores are always busy, with people of all ages talking to the staff in the Genius Bar, or simply trying out the latest iPhone or MacBook.
The Apple Store has been a huge success for the company since opening in 2001 (check out the original promotional video below), and is said to account for two-thirds of Apple’s US sales.
So, what is the secret to Apple’s success? Anyone who has visited an Apple Store will probably have a pretty good idea. This is not a store in the traditional sense, it is a destination. The average visitor to an Apple Store does not necessarily go there with the intent to buy, but rather to familiarise themselves with the latest products, or to learn how to get the most out of their existing hardware at a Today at Apple event.
This is no mere accident, nor is it the result of Apple simply selling products that many people want to own; an iPhone can be handled just as easily in John Lewis as an Apple Store. No, the Apple Store has been designed since inception as an experiential destination, with Ron Johnson, senior VP of retail, aiming in 2000 to model the new stores after libraries rather than traditional shops. The new Apple Stores were to be communal spaces built around the Apple product range, a place for people to interact, to learn and to immerse themselves in the Apple brand.
Tim Cook, who took over as Apple VP in 2013, said of the Apple Store, “I’m not even sure “store” is the right word anymore. They’ve taken on a role much broader than that. They are the face of Apple for almost all of our customers.”
This is the lesson that traditional retailers must learn from Apple if they are to survive the changing landscape of the high-street. Shoppers no longer want simply to shop, they can do that with much greater ease, and often cheaper, online. But people will always want somewhere to go for the sake of experience, and that is something that is a demand online can never entirely replace.
Apple’s current head of retail, Angela Ahrendts, said as much in an interview with LinkedIn, remarking that “Those that have added entertainment and food and beverage—it used to be that 80-20 rule, it would be 80% shopping and 20% experience—it’s got to go the opposite now. Because all the shopping you can do faster, cheaper, etcetera online.”
The high-street is entering a new phase in its history. Brands which were synonymous with the British high street such as Woolworths are already long gone, and there may be even higher profile companies who fall by the wayside in the near future. However, it is clear in the example set by Apple, and by the new flagship Microsoft store on Oxford Street, that consumers still want to visit high-street stores, you just have to give them a reason to do so.
If you would like to reach your audience online rather than in the high street, contact digital marketing specialists Clark St. James on 01603 343477 or info@clarkstjames.com. Our team deliver a scalable return on investment across the major search and social media advertising channels.