Can A Shift to Added Value Services Help Save the High Street?...
Not a week goes by it seems without another tale of gloom and doom from the High Street; from store closures to CVAs, the headlines this year have made particularly grim reading for anyone with an eye on the UK retail sector. A lot has been written about how bringing added theatre and creating richer more emotional experiences are critical to attracting shoppers back to the High Street. Yet, beneath the surface, some of our more innovative retailers are going one step further, creating experiences which help build ongoing relationships with their most engaged customers.
I have written in a previous blog how the gaming industry in particular are transforming themselves from a pure retail environment into a genuine destination for young gamers. This has long been a core part of the Games Workshop DNA and Game’s Belong ‘gaming arenas’ have taken this a step further as they look to fight back against the plethora of cheap alternatives available online. In this sector at least, there have been strong results; Games Workshop continues to exceed all expectations – it’s latest trading statement revealed a 15.9% increase in sales, rewarding investors with a 23% increase in dividends as a result.
Similarly, whilst Game has seen mixed trading results in sales terms at least and has recently agreed a £52m takeover with the Sports Direct Group, the Belong arenas show promising results:-
- 64% increase in party bookings
- 47% increase in customer value
- 25% increasing in gaming hours
- 52% increase in pay to play revenue
It’s interesting therefore to see other brands following suit across a range of categories as retailers look to build more ongoing relationships with their shopper franchise.
For anyone with pre-school children, Pets at Home has long been a poor man’s substitute for a trip to a petting zoo on a rainy day. Whilst toddlers longingly staring at chinchillas may be good for footfall, it arguably doesn’t do much for revenue in the short term at least. It was interesting therefore to see the UK’s leading pet retailer take a 12% stake in dog walking app Tailster earlier this year. This is just another attempt to build a services revenue alongside the core business of selling pet supplies which, judging by the latest trading statement, appears to be reaping dividends. Pets at Home report a 23% increase in VIP customers purchasing additional services (either grooming or vet services through First Opinion) and now has 765,000 customers buying a subscription product. Some 35.5% of customer sales now come from subscription products (insurance, veterinary care or grooming). When it comes to our pets at least, our desire to sign up to ongoing service seemingly knows no bounds.
Sweaty Betty is another brand pushing hard in the services space. As a retailer, Sweaty Betty is already riding high on the athleisure wave, reporting a 20.6% increase in revenue and a 6.6% increase in like for like sales at the end of last year. Whilst increased online sales and international partnerships with the likes of Nordstrom in the US have been at the heart of it’s growth, it too is now looking at how to deliver additional services to its customers. The London flagship, recently opened on Carnaby Street, now includes The Studio @ No.1, offering Sweaty Betty devotees a range of workouts from yoga to pilates and HIIT. When you’ve finished your workout, why not have something to eat at the Farm Girl Café on the first floor or get ready to go straight out on the town with a trip to Duck & Dry? No.1 Carnaby Street is much more than a store, aiming to deliver a range of services to brand advocates through like minded partners.
It would be easy to dismiss this as being a classic case of the London-centric flagship phenomenon but Sweaty Betty offers classes in 70 other locations across the UK and is even going one step further with it’s Sweaty Betty Live event in October this year with VIP tickets costing as much as £75 and celebrity talks from the likes of Fearne Cotton already fully booked.
So how far can this transition from pure retail models to full service offering go? Will see all our traditional high street behemoths attempting to build ongoing revenue streams to smooth the bumps on a rocky trading path? John Lewis is one brand which also seems to be placing a lot of focus in this space. The department store made a big splash in 2018 when it launched it’s Home Solutions division, aiming to build on it’s status as one of the UK’s most trusted brands to offer access to vetted tradespeople. However, it has struggled to gain significant cut through in a market already well served through the likes of Checkatrade and one where other large brands are circling e.g. British Gas Local Heroes. Not discouraged, John Lewis is now bringing together Home Solutions with recently acquired Opun into a single division, offering a ‘full service’ home improvement solution.
However, the challenge remains to be able to execute this strategy in a way which feels cohesive from a consumer perspective whilst at the same time not losing focus on the core business. The likes of Sweaty Betty and Pets at Home can move the value chain because their proposition is so clearly defined and more higher order, emotional brand credentials are backed with genuine subject matter expertise.. Larger retailers like supermarkets on the other hand have historically looked to categories like utilities, financial services and telecoms to capitalise on their brand equity and build ancillary revenues, for most this has ended up as a pure value play rather than an attempt to build an emotional connection with their shoppers. The service offering is often disjointed and. as a consumer, it often doesn’t feel like you’re transacting with one brand.
So, whilst the strategic rationale for offering additional services is clear, for many retailers this may prove a much wider chasm to bridge...