The Halo Effect

Ecommerce may be growing, however, research by CACI has revealed that closing stores can have a significant negative impact on a brand’s online business. The results showed retailers that do not maintain bricks and mortar stores alongside a transactional website typically experience 50% lower online sales than those retailers that do have a physical presence.

Closing stores may seem a quick solution to reduce costs, but as the ‘halo effect’ highlights, physical stores and online channels are a fruitful combination for retailers. Many customers who purchase online still look to visit stores as part of the customer journey, to either enjoy the shopping experience or to touch and see the items before purchasing. Physical stores showcase products and build brand awareness and loyalty, and if used with other purchasing methods such as click and collect, they act as an opportunity to boost sales further.

To make physical units more achievable for restricted budgets and prevent closures, landlords are changing rent agreements to become shorter, more flexible and competitive, with some retailers agreeing on rent reductions or monthly rent.

Despite the doom and gloom across the headlines, it is encouraging to see that leasing activity remains buoyant. Over the past month alone there has been an abundance of new lease agreements including:

• Uniqlo, the Japanese fast-fashion brand has signed two large-format stores in Angel Central, Islington and intu Watford
• Nando’s, Greggs, KFC and EE have all confirmed units at Fosse Park, Leicester
• The Crown Estate has secured a raft of new lettings at Ocean retail park including Smyths Toys, Boots and Card Factory
• Mango has signed for space in both intu Merry Hill and intu Watford
• Waterstones has confirmed to launch at Silverburn in September
• Sketchers has added a unit at centre:mk to their portfolio
• The White Company is to open its first site at Westquay, Southampton

It is clear that the high street is very much alive and kicking, with online-only retailers increasingly opening physical space. Brands such as Missguided, Amazon, Manchesfashion.com and Farfetch have all gone from just transactional websites to opening a physical store.

Downsizing physical portfolios can have severe consequences. Consumer behaviour may be changing, but the experience is still high on the agenda and given that only 10% of purchases are completed online, physical stores are essential to increase and maintain revenue.