At the turn of a new decade, Drapers asks experts from financial services firms how they think fashion retail will look in 10 years’ time.
One of the most tumultuous decades in the history of retail – filled with administrations, company voluntary arrangements, and low consumer confidence as a result of political uncertainty – has come to an end.
Financial experts, including the “Big Four” auditors, predict a brighter and more sustainable and technology-fuelled future for retail over the next 10 years, as the role of the store changes and high streets transform to meet new needs.
Sue Richardson, retail partner, KPMG UK
The days of growth being measured by store rollout are over
Ten years from now, the oversaturation of retail will have corrected itself by means of “business Darwinism” – survival of the fittest. Those unable to adapt to the new climate will be replaced by eager newcomers that can, and we may even see a closer relationship between brands and consumers with further direct-to-consumer exploration.
Consumers still value human interaction and great customer experience. Although much noise has been made about the death of the high street, it still plays a key role, but perhaps as more of a showroom. Not all consumer transactions will be online though, and online penetration is likely to be 35%-40% 10 years from now [a KPMG/Ipsos Retail Think Tank whitepaper Retail 2025 found], although it will vary across sub-sectors of retail.
There is little denying that retailers hold too much physical space – 30% too much in some cases [KPMG/Ipsos Retail Think Tank whitepaper UK prospects for 2019 suggests]. The days of growth being measured principally by the rollout of new stores are over. We are likely to see much of this defunct excess space repurposed, whether it be into offices, co-working space, residential, leisure offerings, or even health and education hubs.
Retailers looking to the future will undoubtedly have to think carefully about sustainability. Consumers will become more vocal about the issue and proactively seeking out businesses that better align with their values. A keen focus on having the right people in house will also be critical in the coming years. Store staff will need to showcase exemplary customer experience, whilst leadership will need to be fully equipped to leverage the power of data, consumer insights and innovation. The latter is likely to require looking beyond the retail industry for the necessary skills.
Retail is far from dead, but it is certainly being reinvented.
Ian Geddes, north south Europe head of retail, Deloitte
The changing role of the store will impact the retail workforce
Retail is going through a period of unprecedented change. This is set to accelerate for the foreseeable future as established trends, such as the shift to online and consequent need for fewer stores; automation and its impact on the workforce; fragmenting competition; and changing consumer behaviour will continue to challenge the traditional model.
Office for National Statistics data shows that online already accounts for 20% of retail sales, and we believe this will grow to 35%-40% of the market within the next 10 years. Fashion retail is one of the areas that is currently experiencing the fastest rate of change.
There will be fewer stores. Of those that remain, some will exist only to support the online business and provide touchpoints for customers to try, return or collect stock. Others will be focused on experience, and have little or no stock to sell.
The changing role of the store will impact the retail workforce. We believe that there will be more staff in store, albeit in fewer stores overall, and fewer staff at head office, as central functions are streamlined, cloud-based platforms are adopted, and artificial intelligence is exploited.
Local authorities must play a role in the regeneration of town centres. They will be joined by institutional landlords [such as Intu, British Land and Hammerson] and, ultimately, smaller private landlords as the pace of repurposing accelerates and encompasses not just secondary shopping centres and department stores but also individual shops. This will lead to innovative new concepts, such as micro co-living and micro co-working, emerging in spaces previously occupied by shops and breathing new life back into high streets.
Martin Carr, strategic retail adviser at EY
Technology will be key to improving the customer in-store experience
Although we are seeing retailers reducing the number of stores, and even disappearing entirely from the high street, I predict that a physical presence will still be key to many retailers’ strategies over the next 10 years.
The digital evolution has empowered consumers more than ever before. They demand greater choice, convenience and speed, which most online retailers can deliver. However, many customers will continue to want to interact with a physical presence that a shop can offer, evidenced by the fact that in-store sales are falling faster than footfall, fuelled heavily by the desire to click and collect.
The retailers of the future will be those that manage to seamlessly blend a consumer’s digital and in-store experience with true personalisation throughout. Although we will continue to see retailers reducing their number of stores, we will also see them upping their game in the ones they retain.
Technology will be key to improving the customer’s in-store experience. Perhaps when they arrive in store, an assistant or digital assistant who knows the customer’s preferences, and purchasing and browsing history, will be waiting. A digital changing room primed with suggested styles and outfits could also be ready to bring to life a huge range of virtual products that a store could never physically stock. And if their product choice is not available in store, it will be sourced and sent to their home, perhaps via a drone, before they even return from their shopping trip.
The winning retailers will be those that manage to truly personalise the customer relationship, whether that be digital, physical, or more likely, a combination of the two.
Lisa Hooker, consumer markets leader, PWC UK
We’ll see more focus on sustainability
Since 2010, we’ve been tracking store openings and closures on the high street. This gives us great insight into what we expect to see in the next 10 years.
We’ll see fewer physical shops as consumers buy more online. There’ll also be a contrast between smaller city centre showrooms, and larger out-of-town shopping and leisure destinations. We’ll see high streets become multipurpose, community-based sites.
“City campuses” will cover work, play and shopping: residential units, health clubs, independents and pop-ups, and flagship stores where consumers can also click and collect.
As people increasingly consider their ecological footprint, particularly in fashion, we’ll see more focus on sustainability: resale, repair and rentals. This will again reduce the need for as many stores, but there will be more demand for specialist and niche brands, as well as boutiques offering curated edits.
At boardroom level, we may see more brands forming partnerships where there was once competition, and, as artificial intelligence becomes even more of a reality, could there even be virtual members of the board? It’s clear that the smartest retailers will focus not only on the skills they need on the shop floor, but also at the top table.
Whatever happens in the next 10 years, stores will not disappear. They will evolve, as they’ve always done, to respond to challenges generated by technology. As retail transforms, stores may become central again. And the sector will not just be driven by big brands, but also by independents that understand their shoppers’ demands, and who collaborate with others to address the challenges they’ll face in the future.
Clare Kennedy, director and restructuring adviser, AlixPartners
If anything, disruption is going to intensify
The past decade has been extremely challenging, as evidenced by the number of names that have been through large-scale restructuring processes, or indeed disappeared altogether from our high streets. There is no reason to think this pace of change and the volume of disruptive factors impacting retail is going to change over the coming years. If anything, disruption is going to intensify.
The best retailers are going to continue to do what they do best: manage their cost bases, focus on appropriate innovation, make bold but considered investments and, above all else, focus intently on understanding and engaging with their customers.
Most retailers, especially those with a physical focus, are only scratching the surface of data analytics and digital infrastructure. While many have been enticed, sometimes misguidedly and at great cost, by customer-facing digital offerings around mobile commerce, virtual changing rooms, and so on, the real battleground is behind the scenes to leverage digital technologies to improve customer understanding, simplify supply chains and improve availability.
Having survived a decade in which the industry championed multichannel and, latterly, has wholeheartedly embraced omnichannel, the winners over the next decade will be those who adopt a “back to the future” approach and realise that the challenge isn’t necessarily to sell more online “because internet”. It is simply to sell more, at the right price, to the right people and in the right place.
David Maddison, associate director (retail and leisure), HSBC
Rental may become a staple of everyday fashion
The high street will continue to evolve. The potential is there, so, with optimism, it will eventually fulfil its potential of becoming a social hub, with more service-led units and shops. The notion of the traditional retail shop may transform into more of a showroom concept, blurring the lines between offline and online offerings, so that customers could purchase a product and yet leave with nothing, but arrive home to find it delivered.
Clothing rental already exists, but it may become a staple of everyday fashion in the future, especially with the more environmentally conscious Generation Z leaving education and having income of their own. By renting, the consumer can generally afford to wear higher-quality textiles, which can typically be more widely recycled.
Alternatively, instead of considering it as renting, perhaps think of it as a subscription-based offering, where parents can pay a fixed amount each month and receive a new pair of trainers as their kids grow. The consumer continually returns the used product and, if the retailer or brand is smart and sustainably led, it can be fully recycled, helping to prevent more products ending up in landfill.
Or how does having your clothing and apparel printed in store in front of you sound? Or even at home? Some retailers and brands already do this through the 3D printing of samples. The benefit of doing this is that there is no minimum order, which is usually the case through traditional manufacturing of samples, and there is no need for the orders to be shipped from overseas.
The overarching message is one of sustainability, and the impact retail and fashion has on the environment.