What is the future of the high street? This question was asked on my #askafuturist thread on Twitter but also raised by an optometrist at the Stockport Business Summit at which I spoke yesterday. So, I figured now would be a good time to tackle it.
The original question from Jasper Hegarty-Ditton was this: “With the recent news around retail decline in 2019 and everyone predicting its continuation, what are more innovative ways we could use our city centres? (Rather than just filling with bars/restaurants/coffee shops).”
Real, structural decline
The first point to make is that the decline of retail on the high street is both a) real and b) structural rather than cyclical.
To put the decline in numbers, we lost almost 2500 shops in 2018. Twice as many shops closed as opened. This left us with a vacancy rate of over 10% by the middle of 2019. On top of this, it is estimated that the top 150 retailers have on average around 20% too much space – more than they can afford.
This translates directly into job losses. Over 140,000 jobs in retail disappeared in 2019 and that is an ongoing trend, not a one-off.
So, why the decline?
Shops are not coming back
When I say the decline is ‘structural’, I mean that bricks and mortar retail is not going to make a comeback any time soon. When you understand why retail has declined, and how disconnected it is to the overall state of the economy, you can see why. That’s not to say that there won’t be a bounce when the economy booms, but it will never reach the same levels as before.
Almost 20% of our spend has shifted online. This combined with the smaller number of shops means there is less reason to head to the town centre, compounding the effect and reducing the chance of serendipitous discoveries and knock-on expenditure. Footfall is falling year on year.
More of our expenditure will shift online as we outsource more of it to automation. I genuinely believe that within a decade or maximum two, we won’t shop manually for more than half our weekly goods. A smart digital assistant will know what we want, order it, and ensure it is delivered. For some people that will be food and sundries. For people like me, that might even include clothes (I buy the same items over and over again as they wear out).
Future of the high street: less stuff to sell and buy
Note that online retailers are struggling as well. But this is mostly about competition, the economy, and some fundamental issues with the costs of logistics and particularly returns. These things can be resolved.
What can’t be resolved is the simple reduction in the volume of things we might shop for. Digitisation is destroying, or has destroyed, the market for many of the staples of the high street. Physical media is largely over, apart from the boutiques and back streets and high value luxury items. It is not coming back outside of those niches. That means we can support a fraction of the number of shops selling books, music, film, stationery, photo processing etc.
Technological convergence means we also don’t need as many devices on which to consume all this media. Digitisation of media doesn’t just disrupt the distribution businesses; it disrupts the device manufacturers. One device can now act as your radio, TV, music player, camera, remote control, games console and much more.
There will undoubtedly be new classes of device in the future. But it’s hard to see how these devices break out of this digital media paradigm in a way that requires anything more than a showcase presence on the high street.
As we look to the future, the situation gets even more stark. It is taking a lot longer than expected, but you can foresee a time when many other products succumb to the same digitalisation. Clothes for example: why ship volumes across the world when you can manufacture on demand close to the customer? Lower cost, lower carbon footprint, less waste. Are those clothes likely to be fabricated at home? Not any time soon. But one smart fabrication unit could replicate many different designs shared digitally. With the ability to try on clothes in full photo-realistic fashion in mixed reality, there is even less need for physical products in a high street store.
So, in smaller towns and cities, the loss of the high street is pretty much assured – at least as a venue for retail. As I said on Jon Richardson’s show, Ultimate Worrier: the question is not whether the high street is dying. It’s “What do we do with the corpse?”
The high street is dead. Long live the high street
So, is there hope for the future high street? Absolutely. But if it’s not in shopping, what is it? It is in living, working, learning, and socialising. Well, and a bit of shopping.
As I said, larger city centres will remain destinations for shoppers with large, experience-focused brand stores continuing to draw crowds. The shops that survive on smaller high streets will be ones that offer high levels of service and craft, as well as products or services that are more spontaneous purchases.
The more that our world is driven by mass market, low friction services, the more I believe we will crave the unique, the original, and the personal. Having a human-fronted service, whether that is an optometrist, or a butcher, will be an everyday luxury that I think will many will crave and choose as a badge of their personal brand. And a statement about their wealth and status.
For these businesses to survive, they will have to be relatively highly priced, when compared to their highly digitised low-friction alternatives, because what they offer will by definition be low volume. That can be a scary prospect for the business owner. But the evidence is that the people who can afford to will patronise such businesses if the service they offer matches the pricing.
There is a ceiling to the prices they can charge though, and if these business are to become a viable part of a diverse high street mix then we will need to see reform on business rates and rents.
Even when we get much of our groceries online and delivered automatically, there will still be those occasions where we just need to grab an extra pint of milk, a bottle of wine, or a bunch of flowers at short notice. Metro grocery stores that cater for these needs are probably here to stay.
Both the more craft based businesses, and the metro grocery stores will rely on footfall to survive. Almost no retail business can survive if it is surrounded by empty units without traffic. If other shops won’t drive that, what will?
The critical strength of the future high street is in diversity. It is not just a place to shop but a place to live and work, learn and play, eat and drink. It needs to be a place for everyone, particularly all ages.
A future high street for everyone
As I’ve written about before, some towns and companies are already making interesting moves in this direction, with Legal and General investing in bringing retirement living into city centres to replace failing retail space. They are not only building homes but amenities such as doctors’ surgeries, creating a gravitic pull for a wider range of potential city-centre tenants. This is likely to increase the appeal of city centre living to, for example, families with young children. That might in turn drive the construction of more schools and nurseries in city centres.
With the shift to electric and ultimately self-driving cars, and even better, drives towards walking, cycling and public transport, town centres can become cleaner, safer places. Many councils, such as Stockport, are now building new, green spaces in the middle of cities.
I picture a future high street that is a rich blend of places to live, work, play, eat and drink, study and shop, alongside services for health and beauty. Clearly some of those components are there today but it is the others we need to bring in, and fast if we are to halt the decline of many high streets and save the businesses that still populate them. That will require intervention by both central and local government, and great innovation and flexibility on behalf of landlords, many of whom may not be financially incentivised to do so. Accepting lower rents on their properties to keep streets vibrant may well lead to a devaluation of their asset, something that could be much more difficult for them than having empty units. Changing that situation may too require government intervention.