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Economy

Are We Seeing the Dawn of a New Era in Retail?

A BRINK interview with Author of Retail Therapy: Why the Retail Industry Is Broken — and What Can Be Done to Fix It

Even before COVID-19 struck, high streets and shopping malls around the world were facing huge challenges. Last year, 9,000 stores closed in the United States alone. The impact of internet shopping and the changing habits of a new generation of consumers have been felt across all retail sectors, both big and small, luxury and discount. These changes have now been amplified by the shutdown.

Mark Pilkington is a former retail chief executive and the author of the recently published book Retail Therapy: Why the Retail Industry Is Broken — and What Can Be Done to Fix It. BRINK spoke to him about where he sees the sector heading and began by asking how COVID-19 has accelerated the trends that were already evident.

PILKINGTON: It has accelerated them in two ways. It has damaged the already weak retail players, and therefore, we’re going to see financial damage and fewer stores reopening. And it has enhanced the growth of the internet because the internet companies have done really well. The market share of online shopping has gone up to 30% in the United Kingdom in April 2020, from 19% in November. And that’s a very substantial shift. But also, even after we come out of lockdown, the retail experience is going to be a rather muted kind of experience with social distancing. It’s going to be difficult for people to shop, and it’s not going to be the relaxed atmosphere that we normally enjoy. 

BRINK: In your book, you paint a devastating portrayal of the crisis facing retail. You mainly focus on the U.K. and the U.S. Is this pattern the same in other European countries like France and Germany?

PILKINGTON: The pace of the change is different in different parts of the world, but the process is happening all the way around the world. The main differentiator is the share of online. So in the U.K., it is around 30% penetration; Northern Europe’s is in the high teens, and Southern Europe’s down at 5%-6%. But, wherever the penetration is reasonably substantial, retail is suffering similar kinds of damage. 

BRINK: There’s a huge number of jobs at stake in retail, and as you say in the book, many of them tend to be low-income jobs. What’s going to happen to these jobs? Do you see any way they might be saved?

PILKINGTON: Unfortunately, jobs will go because there’s not only going to be the transfer to online and the general economic malaise, but also, retail is going to be pushed to automate a lot more services. All of that reduces the administrative roles there are in stores, so I think there will be a reduction in the number of workers. 

Can Retail Do a Reset?

PILKINGTON: But if retail takes this opportunity to do a reset, it could create a better category of jobs. All the things that made retailing an interesting career for people 20 years ago have been stripped away. Retailers have not offered full-service contracts, the level of wages is very low, and often, the level of training is very low and the labor turnover is consequently very high. So from being a fairly specialized and interesting type of job, retailing has become very basic, and the level of service that most customers get out of the staff in the store is not that high. 

My vision is that there should be a real upgrading of the whole retail experience and that the human element is going to be really, really important in providing what you could call a personal shopper: more knowledgeable retail advice, with more of the transactional side actually shifting to the online channel. The retail job could become more of a consultancy role, and that would be better not only for customers, but it would be better for the employees as well. If that doesn’t happen, if all you get in a store is what you’ve had in the past — which is a whole bunch of goods, a transaction and a very small fringe of customer service — that’s not much value-add versus what you get online. So, I think that continuing with the current low level of service that you get in stores is a recipe for disaster for the retailers. 

If you want your brand to stand out, you’ve got to have something more than just commodity goods. That idea of shared purpose is going to become very important. 

BRINK: So, looking ahead, what do you think the new store will look like? How do you envisage a successful new high street or stores looking?

PILKINGTON: It can’t be addressed at the individual store level. It has to be addressed at the community level, a high street or a mall. A number of things have to change. The first is that we’ve got to get away from the idea that retailing is about transacting goods, because if you look at things purely on the level of transacting goods, then the internet is lower-cost and more efficient. Twenty to 30 years ago, the shop was the only place you could get goods. But that’s not true anymore. 

The Experiential

PILKINGTON: So, it has to become experiential. But what does that actually mean? Humans do like to congregate: They go to football matches, they go to churches, they go to restaurants, etc. They like being with large numbers of other people in buzzy, fun environments. If retail can become that, then it could differentiate itself from online. 

The brands we see on every high street are the same; there is no excitement. All the innovation is happening online, but the new brands are not able to take physical space due to the high rents and long leases. If landlords want to get excitement back onto the high street, they have to offer better terms to new brands.

Then there needs to be other things, like food and entertainment, and the model I have in mind is the Edinburgh Festival-type model, which I visited last year. I was blown away by the level of creativity and the buzz around. You want to go somewhere and have a new experience and to mingle with other people, so the overall context needs to become a bit more festival-like, and the role of the arts and entertainment is going to become more important. People are already doing it with food, with all the high-quality street food markets like Borough Market in London, and retailing needs to follow the same model. 

BRINK: I noticed that during this COVID crisis, small corner stores have done quite well, and have seen an uptick in service. Is that a model for the future? Do you think that’s the sort of thing that might last?

PILKINGTON: I think a number of people have developed quite a close personal relationship with their local stores, and people are starting to value them a little bit more. Having said that, the sort of crushing economic pressure on small stores, which has been around for the last 30 to 40 years, is unlikely to abate in terms of the economics of running small-store operations versus much larger operations. So, I think there might be a short-term boost for them. I’m not sure about the longer term. 

BRINK: You talk about the changing consumer habits of different generations as Gen Z goes into the workplace more and more. How much are they going to change the way shopping is done?

PILKINGTON: Younger generations are much, much more favorable to shopping online and have grown up with it, and they’re much more tech-savvy. They are also less influenced by superficial brand glamour and more interested in the purpose and contribution a brand is making to society. So if you want your brand to stand out, you’ve got to have something more than just commodity goods. And one of the big elements for brands is going to be having a story around how you’re doing something that has some purpose, some kind of emotional empathy with your consumers, with your community and your employees. That idea of shared purpose is going to become very important. 

Mark Pilkington

Author of Retail Therapy: Why the Retail Industry Is Broken — and What Can Be Done to Fix It

After graduating from INSEAD, Mark Pilkington joined Courtaulds, later becoming CEO of Gossard, where he was responsible for initiating the global success of the Wonderbra. Subsequently, he was chief executive of KOJ Group, a retailer with 850 stores. His current role is consulting director of Bolt Partners, a digital marketing company. He is the author of the recently published book Retail Therapy: Why the Retail Industry Is Broken — and What Can Be Done to Fix It.

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