Multichannel retailers will need to rethink the size of their store estates in order to stay profitable as more of their sales move online, new research suggests.
Forrester’s UK multichannel retailers report suggests that as shoppers choose to make fewer visits to shops and instead turn online to buy, retailers will need to consider closing stores.
However, argues report author Michael O’Grady, ecommerce support services, such as in-store pick-up or ordering online from the store, give important reasons to have stores.
The report cites Mothercare figures that show 42% of its online orders come from in-store iPads.
Forrester has developed a new store scenario planner tool and says that using it suggests that Next would need to close 10% of its stores by 2023 in a scenario in which between 48% and 63% of its sales take place online by that date. However, suggests report author Michael O’Grady, “It wouldn’t need to close any stores if it could attribute 40% of ecommerce sales to the store.”
The report also suggests that simply closing stores is not enough. “Sales are often lost when a physical store closes,” it says. “Typical real estate models assume that 70% of a store’s sales could be lost to competitors, with the remainder captured by the retailer’s website or neighbouring stores.” It adds: “Without new store openings, store closures often force the retailer to see market share. Retailers must offset the cost savings of a closing a physical store against lost store sales and lost influence.”
The report comes at a time when more UK retailers from New Look to Mothercare are using company voluntary agreements (CVAs) to reduce the size of their store networks. Last month, ONS figures estimate, online spending from clothing retailers stood at record levels, with 17.6% of sales taking place on line in May, up from 14.7% in March 2017.
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