John Lewis has always been viewed as the “bellweather” for the retail sector and their latest trading update merely reinforces the fact that the viability of traditional high streets and town centres up and down the country is being challenged more than ever before. There is a temptation to attribute short term financial performance to the cost of combating the coronavirus pandemic but the truth is that Covid 19 has simply accelerated an ongoing transition to digital platforms.
However, if you think that is simple to achieve – think again. Online platforms are expensive to operate. It is reported that the Online System Spend by Next in January 2019 amounted to £167m. The company estimates that capex on online systems will increase by 328% over the next 24 months. How many retailers can absorb that level of expenditure when margins are already under pressure?
For online retailing to succeed, the customer requires choice, value and convenience. Life for pure online players has its own challenges – particularly in respect of customer retention. It is reported that Amazon spent $11bn on advertising last year – again, how many retailers can sustain that level of expenditure?
Multi-channel retailing is the stable medium. This throws a life line to some high streets and shopping centres but against a wider picture of consolidation. There will be winners and losers. The winners will still suffer a painful readjustment in value. The losers will need to reinvent themselves – not with open spaces and statues of people who have never offended anyone – but with alternative uses for which there is genuine demand. The challenges are multiple. It will undoubtedly require local councils to step up and take the lead, but with limited resource, they will require assistance from the private sector in the form of partnerships. Sadly, there are no quick fixes. This will take time but if there is one positive from the pandemic, it has hopefully accelerated the process.