Jonathan De Mello is head of retail consultancy at retail property adviser Harper Dennis Hobbs.
With New Look recently announcing a reversal of its decision to close its stores because of the effect it would have on its online business, it is worth taking a look at the increasingly complex omnichannel world and the role physical stores play within it.
A trend increasingly discussed in the UK is the ‘trading ecosystem’ retailers need to consider when entering new markets. This generally applies to retailers that also have wholesale and concession doors in addition to free-standing stores and an omnichannel platform. It relates to a desire to make money through ‘balancing’ the ecosystem of all possible outlets, in addition to building brand equity.
The approach is becoming increasingly relevant as retailers compete to trade in the best locations to build up the brand, fuelling growth for their online business and generally yielding stronger profit margins. The ecosystem concept extends this to wholesale and concession retail, which in certain markets can outperform standalone stores in terms of profit margin.
Channel choice is therefore key. Bricks-and-mortar stores are essential in terms of building up brand awareness to drive sales through other channels as well as providing an outlet for click-and-collect services, which generate the highest margin of all because of the delivery costs associated with pure-play etail.
Given the continued importance of physical stores - which in themselves may not generate stellar margins in high footfall areas,as these locations often have high rents - we as an industry should move towards trying to measure the positive effect of a standalone store on brand equity.
One way this could be done is through applying the metrics PR firms typically use, such as ‘advertising equivalent’ to footfall numbers going past a store. This would better aid retailers - and landlords - in understanding and quantifying the true benefit of having a store beyond simply the base turnover and profit it generates.