Brands have always eyed opportunities to get closer to the consumer and now a generation of names are taking their own stores.
The make-up of UK high streets and shopping centres is transforming, with adviser Savills forecasting that the next year will see the range of retail occupiers becoming increasingly diverse.
Dyson and Tesla have launched stores in high-footfall locations with great success – and Microsoft is about to follow suit – and the property firm also expects to see traditional out-of-town retailers begin to move into these locations.
These brands join a growing list, including Apple, Estée Lauder, Lego, New Balance and Samsung.
At its heart is a desire by brands to cut out retail partners and sell direct to consumers – an ambition which is encouraging not only manufacturers but also online-only retailers to test out physical retail space.
Fashion brands have led the way in transitioning from pureplay, accounting for 29.6% of all online retailers taking physical space in the UK to date, according to Savills.
The furniture and homeware sector (25.9%) and electrical, DIY and building supplies brands (14.8%) follow, according to the firm’s Retail Revolutions: From Digital to Physical report.
“We’re seeing a lot of activity with car manufacturers, which like the idea of taking their offer direct to consumers rather than going though dealerships,” says Marie Hickey, director at Savills.
“Shopping centres have been the main focus so far but the next wave are looking at off-pitch urban sites.
“Luxury is another sector to have expanded by opening stores direct, rather than concessions in department stores.”
While many of the initial stores have opened as brand flagships, funded as much by marketing budgets as store revenues, a number have enjoyed more robust retail sales than anticipated, and that may mean that wider roll-outs are more seriously considered, says Graham Barr, head of advisory and transaction occupier services, UK retail, at commercial real estate firm CBRE.
Direct selling success
“Companies such as Dyson and Tesla have actually found that their retail has performed far more strongly than they expected. What was primarily a marketing and awareness exercise for them has in fact proven a strong retail channel,” Barr adds.
“So while Dyson is active in expanding in key European cities and internationally, it is also considering more opportunities in the UK than were originally envisaged. Similarly, some of Tesla’s locations are proving highly profitable in their own right.”
“Companies such as Dyson and Tesla have actually found that their retail has performed far more strongly than they expected. What was primarily a marketing and awareness exercise for them has in fact proven a strong retail channel”
Graham Barr, CBRE
The embodiment of this new approach came in September with confirmation that Microsoft is set to open its debut UK store just a stone’s throw from rival Apple’s London flagship.
The technology giant is poised to take over the Regent Street space occupied by United Colors of Benetton when the fashion retailer relocates later this year.
Microsoft UK head Cindy Rose says that as well as stocking products, the store will host workshops and training sessions, building on the concept launched in New York.
And there are more new entrants in the queue. Colette by Colette Hayman, the Australian handbags and accessories retailer, was set to make its UK debut in October with a 2,325 sq ft flagship store at Westfield Stratford, and a second store at Manchester’s Arndale Centre in November.
UK’s transparency attraction
Barr says CBRE is looking at 20 to 30 locations in the UK and describes Britain as “still a highly attractive market” because of the high transparency levels here.
“While operating costs are high, there is rarely key money to pay and the system is clear and well organised.”
For the UK high street, the big question is whether any of these brands will take significant space, or inspire enough others to replace those legacy retailers continuing to contract.
While this seems unlikely in the immediate term, there are one or two examples that provide hope, says David Dalrymple-Pryde, innovation strategist at retail consultant GDR Creative Intelligence.
“We might see the likes of [US eyewear retailer] Warby Parker consider the UK, having established a strong presence in the US,” he says, pointing to its evolution from pureplayer into a multi-store retailer.
“There are also new niches, such as the mattress companies that are redefining the product and positioning them as much higher-cost products.
“Where there seems to be a gap is for lower-cost, generic retailing. The sort of thing that Lidl and Aldi have achieved, but away from grocery. There is definitely a consumer appetite for unbranded products and, although it may not happen soon, there is a niche there that could be filled.”
As for the current generation of primarily technology-based manufacturers-cum-retailers, Dalrymple-Pryde says: “There is certainly an established trend of brands building experience spaces.
“It goes beyond simple marketing and is more symbolic of how many product categories have crossed over into lifestyle.
“The most emblematic is Apple, which moved consumer electronics away from function and price to become a lifestyle statement, or the new jewellery of the modern age.
“It’s more like fashion – who would have thought your brand of vacuum cleaner would be a signalling statement about you?”
David Dalrymple-Pryde, GDR
“This is particularly relevant where the brand is selling its products as an ‘eco-system’, because this requires a huge amount of brand control and that can be hard to achieve online only or within another retail environment.
“This is what is prompting the likes of Microsoft, Samsung and Dyson to enter the retail environment, because they can then sell a lifestyle story around their brands.
“It’s making these categories more like fashion – who would have thought your brand of vacuum cleaner in the corner of your home would be a signalling statement about you?”
At the same time, established names, such as Nike, are looking at how they can fragment their brand, opening smaller stores that reflect an individual element of the wider brand; so it might look at bespoke trainers at an East London location and then focus on running and fitness in a West London store, breaking the brand down in the smaller spaces.
“Obviously athleisure has continued to perform strongly and Lululemon has proven a great example,” says Barr. “Adidas is upsizing on Oxford Street and although New Balance has perhaps not expanded as quickly as first envisaged, it’s also moving forward.
“Increasingly fashion retailers are dedicating more space to sports fashion.”
Reboot planning rules
However, it has not been all plain sailing. In May, US electric car giant Tesla confirmed it was having to reverse out of its high-profile Oxford Street store, having signed a 10-year lease in 2015. Issues with change-of-use planning permission have been blamed.
City guide publisher Time Out has also had to rethink its plans for London after twice being turned down for planning permission for a food emporium in Shoreditch, and there are concerns that long-standing planning rules are not flexible enough to cope with the innovation going on in the retail arena.
Hickey says: “One of the biggest difficulties is the inflexibility of planning, where terms of use can be very rigid. Tesla having to come out of Oxford Street is a good example of that.
“If we want to be adaptable to new retail then we need planning to enable that to happen. The current approach is a bit archaic and rather limited. For councils they really need to help deliver that change or face the prospect of empty shops.”
1 Reader's comment