Retailers must consider reducing store numbers, says Deloitte

As online sales increase, are bricks and mortar stores using space correctly?
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New research from business advisory firm Deloitte suggests that focusing on preserving sales volume and store numbers is preventing retailers from taking the necessary step of reducing physical store space.

Deloitte says online sales already account for the equivalent of 60 million square feet and believes that number is set to increase, leaving bricks and mortar retailers with large store spaces at risk.

The research also found that ‘store only shipping’ – ie that with no online research beforehand, accounts for 72 per cent of total non-food sales. But online will inevitably become a bigger part of the shopping process. If you have a lot of shop space it has to be used correctly.

Hugo Clark, director in Deloitte’s real estate team and report author, commented: “The death of the high street is far from being a reality, yet stores are now just one part of a larger, more connected customer experience and many retailers are struggling to define the relevance and future contribution of their physical space.

“Shops now represent a potentially clumsy, fixed point in an increasingly mobile world. In many cases, they are slow and costly to adapt, expensive to operate and difficult to relinquish once surplus to requirement.”

The firm recommends retailers examine their portfolio strategically, and cut down based on what will work rather than by when leases end.

Clark concluded: “Given the rapidly changing retail environment and the speed with which new technologies are emerging and impacting on the use of physical space, the biggest challenge facing retailers is to continually test and challenge the size, shape and purpose of their store portfolios. This is likely to be a constant but critical process of evolution for retailers seeking not just to survive but to flourish.”

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