Emma Long, commercial director at work space provider BizSpace, looks at how some small retailers are fighting back by finding an alternative to the traditional high street setting.
With bad news stories continuing to pour out about the high street, you could be forgiven for thinking that setting up a retail business in today’s economic environment would be pure madness.
But while we might not have seen the last of the woes faced by town-centre retailers, the future is not necessarily so gloomy for retail more generally.
It is well known that the way people shop has changed. Online retail sales rose by 15.3% over the past year to reach 18.2% of all retail sales, meaning almost one pound in five is now spent online. In 2013, the figure was just one pound in ten.
With every challenge comes an opportunity: for the real estate industry, for example, the rise in online shopping has manifested itself in less demand for town-centre retail property but an increasing call for warehouses and logistics space. If businesses are entrepreneurial enough to observe how habits are changing, anticipate what that means in terms of supply and demand dynamics, and position their offer accordingly, they stand to be successful.
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It is refreshing to hear about how some small retail businesses are fighting back. A combination of competition from online retailers and rising costs of high street premises has made life for retail businesses challenging, regardless of size. However, times are particularly tough for small retailers, which usually don’t have the clout to negotiate a lower rent with landlords.
Altus Group recently analysed local rating lists data, which revealed 5,648 small shops left the high street between 2010 and 2017 in England and Wales. Not surprisingly, demand for retail space has fallen to its lowest level since the last recession.
Renting traditional high street premises for many small retail businesses has become too costly and risky. Traditional leases often commit the tenant to rent the premises for at least a year, which presents challenges when it is difficult to predict sales revenues. Rents have risen, but there is also the issue of business rates, with the recent revaluation seeing some locations’ rates doubling.
Against this background, as the UK’s largest provider of flexible workspace, we have noticed a sharp increase of retailers taking space in our business centres, which tend to be in out-of-town-centre locations. Some are now using a combination of an online presence and renting physical space, which might be an office, studio or workshop, to run the business and in some cases showcase products to clients.
Sara Strafford runs her Studio B fashion retail business from our Bridge House business centre in Sunderland. She said: “There was a time when being visible on the high street would have been essential to running my business. But I had to close my city-centre business because rents were too high.
“I cannot sustain being tied into a long-term lease as rents and rates continue to rise.”
“So I’ve moved the majority of my sales online and taken space in a BizSpace centre, which gives me flexibility and support, and allows me to dedicate more time to running my business rather than managing my finances.”
When it comes to going online, small retailers initially have a choice whether to use online marketplaces, such as Amazon, eBay or Etsy, or set up their own site. There are pros and cons with both options.
Marketplace websites usually make it easier for customers to find your offering. However, your branding will be suppressed, competitors’ products highlighted alongside your own and there is a significant cost.
Having your own site helps build your own brand, but it does take time, effort and money to have an effective website.
Once established online, flexible workplaces allow retailers to benefit from lower cost and the flexibility to expand or reduce space requirements easily while avoiding being locked into onerous lease agreements. And, unlike working from home, serviced business premises help provide a more professional working environment, a community to be part of, and that all-important differentiation between work and family life.
Read more about the current state of UK high streets:
- How smaller retailers can stand out on a changing high street
- Why physical picks beat virtual kicks in today’s chaotic retail landscape
- Government urged to save high street with 50,000 jobs lost in 2018 alone
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