Downsizing, downsizing, downsizing......

Retailers are all starting to downsize. Suddenly we are discovering we have too much store space. Next is about to launch small format stores, B&Q is about to free up space in sheds, Mothercare is reducing overall number of stores.

But how does a retailer downsize? We agree that as footfall reduces and e-commerce sales expand retailers will need to reduce the store footprint.

Options are:

• Treat stores as service points, reduce space and reduce the range of stocked items


• Keep only out-of-town stores, where footfall is guaranteed


• Reduce total number of stores, and give up physical presence in marginal areas

These are all tough choices. Almost all these choices will involve revenue sacrifice in order to maintain profitability, in the face of falling footfall.

Whatever the choices, the overhead costs retailers have been used to will have to be dramatically reduced.

We will see an increase in IT outsourcing, Finance outsourcing, sharing of logistics, and even sharing of outlet space.

There is a looming inevitability.........

Footfall in stores is falling!!!!

The financial times reported recently that footfall in UK high street stores had fallen about 9%. Some of this may be the economy but the rest might be the growth in on-line. Is this the begining of the end of store retailing. I have always maintained that once footfall falls below a certain level, stores become effectively unprofitable. I have called this the tipping point. How much does internet retailing have to grow before we reach tipping point. Or alternatively what do we need to do to keep customers coming back into store.

The advent of click and collect provides some hope, but will it be enough. It is hard to tell, but it has to be supplemented by something else. The in-store experience. We have to make human contact count, otherwise what is the point of going into a store.

There is some evidence that customers are willing to pay more for quality human contact. The retailers who are doing it well, like Majestic, John Lewis are doing so whilst maintaining price competitiveness, however the others will need to find excuses for charging a premium for human contact.

Of course this is all about the value of the services and expertise can be only provided by experienced sales staff.

Richer Sounds is another retailer that does that well.

Whatever the answer, retailers need to re-examine closely the role of stores. This problem is not going to disappear.