Online Futures 2020

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The Centre for Retail Research  have today published their research document “Retail Futures 2018

Here are their pretty gloomy headline forecasts for 2018 :

  • “Total store numbers will fall by 22%, from 281,930 today to 220,000 in 2018.
  • Job losses could be around 316,000 compared to today
  • The share of online retail sales will rise from 12.7% (2012) to 21.5% by 2018 or the end of the decade.
  • There will be a further 164 major or medium-sized companies going into administration, involving the loss of 22,600 stores and 140,000 employees. Many of these companies will survive but at the cost of closing more than half their stores.
  • In spite of the Portas Pilots, the High Street will continue to suffer: around 41% of town centres will lose 27,638 stores in the next five years.

UK retailing has the highest proportion of online retail sales, so what happens here is being closed watched by foreign observers as Britain becomes a test bed for retail innovation.”

As ever we will simply have a look at their Online forecasts and comments.

“ Online Retail

Online retailing as a percentage of all retail sales is now 12.7%. Food online sales are very low (3.7% of all food sales) so that the share of non-food is now up to 19%. This will change quickly over the next five years, although we expect all four main grocers to develop massively their food online offers so that with Waitrose and Ocado the food online share should be up to 9.5% by 2018.

These figures are estimates. It may take a year or two longer before online retail gains 21.5% of the retail market but many commentators feel that the online share will get to 25% by somewhere around 2020-2023.”

We’ve extracted from our monthly look at the regular ONS statistics the ,sort of, comparable statistics for 2012 (as published within the latest {April 2013} release) and have done some linear projections to provide a 2018/2020 set of figures.

Whilst the start point in 2012 looks to be, across the board somewhat lower than the Centre for Retail Research’s the growth in % terms through to 2018 is not entirely at odds eg our ONS based projections show an overall growth of some 72% in the time frame (or just under a compound annual growth rate of 10% per annum) compared to the Retail Futures 2018 figure of 69.3%.

 The main area of difference is on the Food front and as a huge market with 4 heavy weight and the low cost 2 competitors we certainly see the market at least keeping up with other retail sales but perhaps not reaching a double digit share this decade.

One very well made point by the centre we thought was their Bricks and Mortar closing comments:

“Although retail change might seem to concern only retail employees and change-averse retail businesses, the transformation will have unintended consequences for the many hundreds of £billions tied up in retail property by pension funds, investment companies, shopping centre owners and retailers themselves. The current business model is intimately involved with real estate: a significant fall in property prices caused by major falls in the demand for stores (and store profitability) will affect all property assets for many years to come. One response will be to reduce rents (and therefore the profitability of developments). It is already having a significant negative effect on many UK high streets and a detrimental impact on town centres. Action now will prevent the transformation of retailing from becoming a long-term crisis for property markets and town centres.”

One of their suggestions partially addresses this situation:

“Retail Futures 2018 recommends that a pump-priming fund of £320 million is required to start redeveloping these problem town centres to turn failing and empty shops into good residential accommodation, create more service/entertainment/leisure outlets, and/or provide offices, doctor’s surgeries, classrooms/meeting rooms or other facilities for which there may be a local demand. As a result of this policy perhaps 15,000 – 20,000 new homes could be created over four years.2

We certainly see the Bricks and Mortar property backdrop changing dramatically over this timeframe and we also envisage the growth of non retail business occupancy of the high street alongside the inevitable residential invasion.

We shall see! 

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