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The retail industry has had its challenges in recent years, especially small and independent businesses.
After the delay in revaluation, 2016 saw business rates soar, with around 7% of small firms paying more in business rates than rent. Business rates were the third highest cost for small retailers, after rent and staff costs.
While the Autumn 2017 Budget offered slight relief, expensive business rates, rising overhead costs and bigger competitors – both online and offline – make maintaining a profitable business even harder than before.
With more and more businesses abandoning their physical premises to trade online where business rates don’t apply, what does the future of retail look like? Or, as UKBF member Thetiger2015 questions: “Is the sector’s future bright or dark”?
Amazon’s takeover of the retail world can’t be ignored. The company reportedly has over 310 million active customer accounts worldwide. This August, The Guardian reported that UK revenues alone hit £7.3bn last year, with around 33% of UK households subscribed to Amazon Prime.
Despite the successful business making slim margins on the products it sells (their low profits enable low tax bills: £15m on European revenues of £19.5bn in 2016), its control over the online retail market and exemption from business rates are some of the many reasons that UKBF member Urban Retail believes retail is moving towards a big change.
Unable to compete with the likes of Amazon, small businesses can struggle to match prices and delivery costs. There is increasing pressure to offer free, fast shipping. Similarly, many small businesses don’t have multiple suppliers providing different products at competitive, low prices.
It’s understandable why many people would avoid shopping locally and paying more, instead of saving online.
Building on its huge success online, Amazon established its first physical store last year: Amazon Go. Having opened on 5th December 2016, this bricks and mortar store boasted a seamless shopping experience: no checkouts, queues or staff. All shoppers needed was an Amazon account and the free app.
This technological store came to fruition through computer vision, deep learning algorithms and sensor fusion, which has previously been used in self-driving cars. This “just walk out technology”, as Amazon have named it, is a predecessor to Urban Retailer’s vision of future retail: staffless, technology-driven stores where the brightness will be powered by ATM machine screens and “you simply enter a catalogue number or product code”. He visualises that this process will be completed by paying and having your order collected by robots.
With these convenient stores, the future might look bright for retailers – but technology will leave retail workers at risk of redundancy. Mr D points out that Urban Retailer’s vision already exists in McDonald’s and Argos’s order process: the next step would be to “remove the human cost”. And, as Paul Norman acknowledges, we employ fewer people per transaction now that most transactions are online.
Is it all bad? Well, it can’t be ignored that persuasive ecommerce and social media with call to action buttons are powerful sales generation tools that small businesses can utilise. However, technology is not always reliable, regardless of a competitor’s size and wealth.
Although Amazon registered a UK trademark on the 5th December 2016, signalling intent to bring Amazon Go to the UK, as of November 2017, the store is only available to Amazon BETA employees; close to ready for the public, but not quite. The “just walk out” technology reportedly struggles to accurately charge people individually when groups of people are in store.
These ease-of-use kinks highlight mean that, regardless of how technologically advanced retail becomes, it’s likely that there’ll always be a need, as Atmosbob puts it, “to speak to someone and ask questions”. Consequently, Awinner2 believes retail workers retrained in “technology skills” and able to rectify any technological hitches, will secure future employment in retail.
Regardless of how great, expensive or technological the challenges retailers face become, it has been refreshing to read that retail continues to adapt and evolve amongst its adverse challenges. There is a strong sense of resilience and optimism across the threads, and in true entrepreneurial spirit, many UKBF members advocate startups utilising gaps in the market.
Everyone has to adapt, Chris34 says. No one is immune to competition – competition is what leads to new opportunities. It’s not been easy, but as mhall puts it: “when I joined the forum 8 years ago users were told shops were dead and the internet would take (B&M) over… yet we are still here”.
Hannah's a recent addition to the team and will be supporting Francois with future UKBF content - warm welcome!