Where will retail investment go – bricks-and-mortar or online?

According to CBI’s most recent Distributive Trades Survey, retailers are planning to make significant investment in their bricks-and-mortar offerings.

The reason? An expected increase in sales and footfall, alongside the need to move physical retail up a gear so it’s ready to compete with the rise of digital. After all, expansion is only a valuable part of retail growth if it generates positive cash flow from capital expenditures, reports the Retail Gazette.

The CBI survey reveals that investment plans for the year ahead have risen at the fastest rate in 17 years. Over a third (35%) of retailers said they intended to invest in operations – an increase of 8% since February this year. This suggests retailers are looking at ways to deal with pent-up consumer demand as Covid restrictions start to ease.

However, there are predictions that the post-lockdown lift won’t last and that consumer demand will wane as more hospitality and entertainment businesses reopen their doors. There are already signs that consumer spending has started to shift away from retail stores towards pubs, restaurants and hotels.

Positive changes, one step at a time

A report by Smart Energy GB reveals that independent retailers were preparing for a “big summer of spending”. Its findings show that 58% of local, independent retailers across the UK have made upgrades over the past 12 months. Plus, at least 51% of small retailers have made positive changes to make their business more eco-friendly.

Another report by shopping centre operator Unibail-Rodamco-Westfield UK revealed the retail preferences of millennials. According to the How We Shop: What’s Changed report, 44% of millennials were more interested than other consumer age groups in contactless stores. Meanwhile, 37% were interested in smart interactive mirrors, and 26% in digital in-store innovations.

As Kate Orwin, Unibail-Rodamco-Westfield UK’s leasing director explained: “Retailers are beginning to understand the importance of technology investment in their stores to respond to these insights.”

She continued: “Although online shopping has certainly grown over the past 12 months, we have seen recently that now people have the choice again, they’re seeking real life experiences and returning to stores.”

An additional boost to consumer spending also comes thanks to savings. According to data from the ONS, the UK household saving ratio rose to 16.1% in the final quarter of 2020 – an almost-record high.

As Orwin explains, consumers are “craving physical experiences” and many have “online shopping fatigue due to environmental reasons”. 

According to the report’s findings, 57% of shoppers are thinking more carefully about the online purchases they make for reasons such as excessive packaging.

Bearing in mind the number of store closures seen over lockdown (Arcadia Group, Debenhams, John Lewis and Marks & Spencer closed – or announced plans to close – stores), many retailers are clearly investing in digital channels in an attempt to stay relevant.

But retailers have to be creative in how they approach their digital transformation efforts. Live-streaming, pop-up shops, rentals and subscription services are all options that need to be considered.

Technology for the future

The pandemic has also revealed the risk that legacy systems can create for retailers. Some of these systems are so old and fragile they cannot be changed quickly. As a result, retailers are looking to the cloud for answers. By looking beyond traditional retail models, embracing new technology and reinventing the customer experience, brands and retailers are doing what they can to grow in the post-pandemic retail landscape.

Cutting-edge technology is key to creating more engaging concept stores, too. Rather than the shop floor acting as a showroom, retailers are now looking to add experiential elements to the in-store experience. These areas need to be kept bang up to date, in-tune with every campaign and highly interactive.

Granted, investment in the technology that allows these visions to happen doesn’t come cheap. The initial outlay will be significant, but in the long-term it will prove its worth as a cost-effective solution that can be updated quickly and efficiently.

By taking an omnichannel approach, retailers aren’t abandoning physical retail. Instead, it’s a chance for them to see every touchpoint as an opportunity to engage with customers in various ways. For example, transforming the shop floor into an experience hub to engage all the senses.

Physical stores give retailers opportunities to engage with customers in a way online retail simply cannot. They help develop deeper relationships with consumers and provide the space to run physical events and pop-ups (thus giving customers reason to return).

The physical experience of retail

There are different reasons why customers enjoy coming into bricks-and-mortar stores. There’s the desire to try on items, test products and physically see what they are about to buy. But there’s also the social element of in-store shopping, the human contact and the interaction.

Retailers need to be able to continue to deliver on those aspects of physical connection so that customer expectations are met. Because no one wants an unhappy, disappointed customer walking out of their door.

Smart retailers will invest not just in their physical stores, but in an immersive combination of both physical and digital. Making use of every square inch of the shop floor allows for a more accessible, contactless, socially-distanced experience. 

And that’s got to be money well spent.

At Delta Group, we work with brands and retailers to help them connect with their customers, meet their strategic goals and create powerful visual communications that deliver impact and boost their bottom line.

For more information on how we can help your business make the right investments, get in touch with our team of experts today: hello@thedeltagroup.com.