The future of the high street, an opportunity for the leisure sector has been saved
The future of the high street, an opportunity for the leisure sector
Businesses on the high street, like all others, have been focused on managing disruption; however, some of the upheavals and fundamental structural shifts seen on the high street have been in play long before the pandemic. The future of the high street report indicates that despite the closures, the high street is ideally placed to reinvent itself in response to the shift in working and spending patterns that has resulted from the pandemic. The perceived weaknesses of the high street model, its fragmented ownership, lack of centralised coordination, low rents and high vacancy rates become strengths as they lower the barriers to entry. Leisure businesses will be critical in the transformation of the high street, as need and value of social interaction and personalised experiences has never been more important.
Upheaval on the high street
From volatility in footfall patterns, fall in occupancy rates, increase in failures and closures and shifts in consumer behaviour, the high street, city centre and shopping centres as a destination have multiple challenges to address.
The trend on vacancy rates, where there are more closures than new openings, has accelerated markedly in the last three years. The first half of 2020 saw 7,834 closures across all sectors of which 1,264 were in the leisure space. This trend accelerated by COVID-19 is expected to continue and could result in a further 30,000 closures by the end of 2022, even with government support.
The rate at which different retail and leisure sectors reopened following the first lockdown provide an indication of the current and future priorities of consumers, and the challenges faced. The reopening rate recorded for different locations and store category type, indicate that the city centres dependent on regular workforce commuter traffic faced a decline in footfall, while seaside towns reopened faster. Hairdressers experienced a mini boom with 88% reopening, as customers sought emergency repairs to haircuts done at home. While accommodation reopened quickly, driven by pent up demand, only 73% of travel agents and tour operators reopened, having been hit by quarantine rules.
Working habits are also likely to change due the pandemic. A recent survey found that 50% of UK respondents wanted their employers to introduce flexible working policies and on average would like to work from home for half of their working week. This means that the money generally spent in city centres is likely to be redirected to the local high streets, shifting demand for businesses such as ‘grab and go’ food outlets as well as post-work leisure activities including bars and fitness outlets. A slow recovery in city centres may also result in large retail spaces looking to include leisure focused sections such as fitness and social centres and cafes to increase footfall traffic.
Government investment towards the regeneration of the high street and the repurposing of redundant retail space is underway with schemes such as the ‘Future High Streets Fund and Task Force.’ There are also schemes to refresh available area with greenery, lighting and seating to make more attractive visitor spaces. In order to improve flexibility and diversity, planning permission rules have been updated. Landlords can now switch within use classes that experience more demand without the need for planning permission. For instance, high street retail use classes such as shops, food and drink services now fall alongside indoor sport, and offices etc. Similarly, retail units can be repurposed as art galleries and libraries and development rights now allow office buildings to ¬¬be repurposed into residential space.
High streets have a diverse mix of occupiers and a strong residential foundation that provides a consistent level of local demand for a wide variety of different uses and have lower occupation costs. There is also a fragmented and often private landlord base that will want available space occupied. With the current high vacancy rates, there is an opportunity to negotiate more flexible rental models. Leisure businesses may be able to leverage these lower barriers to entry and reset their relationships with landlords and local councils to support the reshaping of the high street.
Consumers show greater level of commitment to local leisure businesses
Some trends impacting the high street were already under way prior to the pandemic and are now increasingly embedded in behaviour. These trends include an increased focus on localism, a greater level of commitment to small independent businesses that can identify the origin of their goods, an increased interest in independent operators in reaction to the environmental impact of chains, and more value placed on the experience, human connection, social interaction and wellbeing.
The overall experience offered by a business is critical to its survival on the high street. Data shows that the top ten growing sectors revolved around experiential leisure services such as personal grooming and socialising, while the most affected sectors include financial service providers and pubs and inns. Businesses focusing on the customer experience that is hard to replicate online may be able to carve out a niche on the high street.
Consumers are increasingly seeking products that have a deeper connection with the community and local traditions. In a recent survey, 37% of UK consumers said they would be more likely shop from businesses that offers locally produced products even if it costs a bit more and 24% would buy items online and pick them up in-store as they want to support local stores and workforce. For consumers, establishing trust and staying true to the brand’s purpose and values is important, with 37% saying they are more likely to support brands that responded well to the crisis.
The high street seems more likely to see a demand for authenticity, sustainability and transparent and responsible supply chains. Leisure businesses will need to focus on ethical engagement, being transparent when working with suppliers, improve perception as being fair to their workforce, highlight the quality of their locally sourced products and communicate their safety measures, brand story and local heritage. Additionally, consumers are setting apart time to engage in leisure activities with their social circles such as walking, cycling and playing sports, making the leisure sector well placed to provide a medium for promoting healthy communities and lifestyles.
Evolving consumer behaviour is challenging businesses on the high street to adapt their services and products. While eCommerce is all about choice, convenience and availability, the high street appeals to consumers with more intimate, tangible experiences, whether it is the ambience in a physical store or the location in a popular urban centre. In the near-term the recovery may see a much smaller retail footprint and vacancy rates may rise. However, with the combined forces of the government and local leisure industries, the sector could trigger a recovery by capitalising on these trends while serving the local community.
Find more information on the future of the high street, here.