The changing face of physical retail, part 1: changing places
Date published: Date modified: 2022-10-18

Declining in-store sales, competition from online retailers and the effects of transitional relief on business rates payments posed a threat to physical retail long before the pandemic caused periods of closures and disruption.

Many are optimistic that trade will continue to recover after the latest blow from COVID-19, but the retail sector must respond to long-term shifts in consumer needs and behaviours. Rethinking store portfolios to adapt to the new retail climate is imperative. We have looked at some of the ways this has taken place, focusing on brands that have made some of the biggest shifts in their store estate in recent years.

Moving into concessions

Between 2016 and 2021, Argos’ store portfolio decreased -21.0%, with a decrease of -238 standalone stores. In the same period, the number of concessions it operated increased from 97 to 235. 225 concessions were opened in Sainsbury’s stores. Similarly, Lloyds Pharmacy opened 240 concessions in Sainsbury’s stores during this period.

Filling a role left largely empty by the departure of high street department store brands, Sainsbury’s and other supermarkets serve as local community hubs. The two brands make ideal partners for supermarkets: collection and prescription services round out Sainsbury’s' offer, making it a one-stop shop for customers running weekly errands. Supermarkets open in community-serving areas offer a prime location for increasing relevance and visibility without needing to rent a separate store.

Game’s -28.6% net decrease in stores from 2016-2021 includes a -47.2% drop in standalone stores. It went from 2 concessions in 2016 to 57 in 2021. Most of these were at Sports Direct stores, as part of owner Mike Ashley’s acquisition of half of Game’s esports division. The strong connection between sports and gaming, and the resulting overlap in consumer audience, makes in-store esports tournaments a strong draw that benefits both brands.

Subway opened 192 concessions over the 2016-2021 period, principally at Esso, Shell and BP Connect stations. Concessions in petrol stations marry well with a fast-casual dining offer, especially now that petrol stations offer charging points for electric and hybrid vehicles, increasing time spent at the location. Other food brands such as Leon have also been expanding into these spaces.

Concessions allow retailers to meet their customer base where they are, without the costs of sourcing, leasing and running an entirely new standalone site. Partnerships with complementary brands capitalise on a shared audience, providing excellent visibility and reach for comparatively excellent value and security.

Considering location type

The distribution of footfall has changed noticeably in the last two years, and some of this change may be permanent. Lockdowns and work from home guidance led to more time spent on local high streets but, even as many return to the office, some companies and workers may continue to follow a hybrid working pattern. Independents have performed more favourably than multiples in recent years, further boosted by a locked-down population no longer travelling into major cities for work. From 2016 to 2021, Superdrug, Subway, H&M, Game and Lloyds Pharmacy all decreased their presence in CLGs. Some of these brands shifted towards concessions within larger locations, whereas others responded to challenges in the high street sector by rethinking their physical store portfolio and closing sites in locations that weren’t performing as well.

Argos, Game and Lloyds Pharmacy’s concessions have allowed them to expand into shopping centres and retail parks but shield themselves from some of the downsides of these location types. Shopping centres have faced many difficulties with CVAs and administrations for many former anchor brands, but remaining anchors such as supermarkets still provide opportunities. Retail parks have performed well recently, especially over the pandemic, but some brands may not have enough use for the usually-large retail park units by themselves, so opening concessions allows them to still make use of the benefits of a retail park presence.

Rebalancing across regions

All regions saw an increase in Subway stores from 2016-2021, apart from Greater London where stores saw a net decline of -16 stores in this time. This was driven by a decrease in standalone stores and an increase in concessions. Subway’s move towards petrol stations is partly responsible for this change, but it could also be due to high rents and strong competition from other operators in the city.

H&M’s shopping centre presence increased by a net 13 stores in this time, comprising increases in London, the East of England and the South East, and 9 closures across Wales, Scotland, the North West and Yorkshire and the Humber. H&M said the closures were part of a “long term strategy”, likely formed around optimising store locations and sites and continuing to invest in its online channels. Workers moving out of cities, varying regional restrictions over the pandemic, and overcapacity and overexpansion of chain stores in some regions are just some of the drivers of regional differences in brand performance.

Remaining agile

Even as sites left vacant by department stores become mixed-use developments, and high streets and community shopping centres look to better serve the local population with stronger provision of services, agile retailers see themselves in the future of Britain’s retail locations. By rationalising their store estates and moving into concessions, operators can reap the rewards of a physical presence with reduced exposure to present threats.

To learn more about our site feasibility projects, click here. To find out how the Local Data Company can help your business shape a resilient store portfolio, contact us here.

Sarah Abu-Amero, LDC Marketing Executive

Sarah Abu-Amero, LDC Marketing Executive The Local Data Company 901 901

Sarah joined LDC in 2021, having previously worked as a copywriter and social media manager. She supports the team with digital and written communication, planning and creating content for the company’s website and social accounts.

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