By Pierre Louise Lacoste, co-founder, Ankorstore
In 2021, 1,442 independent retailers in the UK were forced to close after facing a brutal combination of challenges including lockdowns, supply chain disruption, inflation and fuel costs. Those remaining had to innovate to stay afloat, but this marked the start of something important we will see rapidly evolve next year. 2022 will be the year independent retailers start using innovation to make the high street thrive, not just survive.
Retail is one of the world’s oldest industries and was ripe for disruption. While big box retailers and online players like Amazon have been chipping away at chain store sales for over two decades, independent retailers have generally survived by being more specialised and serving local communities. That was until the pandemic came along and took away the footfall, the staff and the trade shows they needed to access products, all at the same time. As a result of the pandemic, there was a massive shift of independent retailers to selling online to drive much needed revenues. But this also marked the start of a wider trend accelerated by the pandemic – the shift to digitisation.
If you speak to most independent retailers today and ask them if they are now online businesses, you’ll get a similar answer, ‘no’. While many may offer products and services online, they are keeping their stores (and the more successful ones may even be planning on opening another site). Independent retailers are emotionally tied to the idea of physical stores and are strongly motivated by sustainability, locality and rooted in their business environment. They like being part of a community, curating an environment for customers to visit, maybe even offering some food or craft lessons on the side. Increasingly, they are former white collar workers who chucked in the corporate towel to pursue their own business dreams.
Now ask them if they still run stores the same way as pre-Covid and you’ll likely get a very different answer. Whether by selling some products online, changing how and where they procure brands from or taking customer payments in new ways, most independent retailers have digitally transformed at least one area of their business. This is a trend that will gather further momentum in 2022. The genie is officially out of the bottle and there are some key areas where we will see some rapid change in the year ahead:
- ‘Supply, meet demand’: Adversity is a hard teacher and over the last two years independent retailers learned tough lessons of what happens when you buy more than you can sell. Procuring more stock than you need is poisonous to a small retailer but during consecutive lockdowns, independent retailers were left with stock sitting in stockrooms that they couldn’t sell or afford to return. Meanwhile, larger competitors with greater liquidity could afford to hold onto stock for months and wait things out. Now independent retailers have found ways to level the playing field by gaining greater control of supply chains. Technology platforms have provided a way for them to get the products they need, in the amounts they can sell, without minimum orders or obstructive wholesaler costs. More and more independent retailers are using this approach and in 2022 this will become the standard rather than the exception.
- The Goldilocks retailer – The flux caused to employment by Covid carried well into 2021 as furlough extended, unemployment increased and people generally reassessed their career ambitions. As a result, many decided to launch their own businesses, either launching new brands from home or opening new stores. Rather than waiting two years to turn a profit, these entrepreneurs are now working smarter to get ahead, and in 2022 we will see a lot more of them. They know how to count and understand how digital can remove the need for upfront investment, the same way that cloud technology did for small businesses. These retailers are cautious on investment during the first lifecycle but also smart and agile enough to adapt to new opportunities. As a result, they are finding ways to keep investment lean so they can offer all the products they need and serve emerging customer needs without going into debt, such as only opening shops when customer demand is highest. This new, age-agnostic generation of retailers will transform the diversity, and resilience, that we see on the high street in the years ahead.
- The ‘Space’ race – The high street isn’t dead, but it is changing. The reduction of business rates announced in the last Budget came as welcome news to many small shops struggling to recoup the costs of store closures, the end of furlough and rising supply chain costs. However, tightening purse strings alone isn’t enough to run a successful business. Unlike chains, independent high street retailers aren’t abandoning the idea of physical stores, but they are making them work a lot harder. In 2022 we will see more independent retailers offer spaces that are showrooms rather than storage areas and places where customers can get a unique, positive experience. Utilising space for selling rather than for storing will be essential, not just for making stores attractive but for extracting the most value out of every square metre of space to improve the bottom line.
- Technology will become a first language – An overarching trend we will see in 2022 will be digital transformation continuing to be accelerated by the changes in consumer habits and business processes. From checkoutless stores to click and collect services, many of the technologies previously thought out of reach to smaller independent retailers will be hitting high streets sooner than we think because of digitisation. This will also enable independent retailers to build close communities with suppliers and partners to respond to their local customers’ demands in real time.
Independent retail isn’t dead, but it is changed forever, hopefully for the better. In 2022 more independent retailers will be able to benefit from the economies of scale previously reserved for much larger businesses and become resilient to factors outside of their control, whether it is competition, a recession or another pandemic. Digitisation isn’t just a way for Big Tech to get bigger, applied the right way it can create a more diverse high street with greater choice and sustainable practices that hopefully our children will be enjoying many years from now.