Head of Consumer Business
Death of the High Street: Can it be saved by SAP HANA or SAP BPC?
12 Oct 2012
BPC, Business, Consumer Business, HANA, Retail & Trade
I've been thinking a lot about the 'Death of the High Street' - worried about the effect it is having on my community, thinking about my own attitudes to online shopping, considering my own shopping habits regarding out-of-town and major multiples, speculating on what will happen in my own High Street.
This blog reflects my views, draws a lot on the Portas Review and contemporary commentary, and puts in a few suggestions that I find have been relatively overlooked.
Although it focuses on the UK and draws on a lot of my personal experience, it is relevant to a lot of developed economies. Even readers in developed economies that still have a strong high street, perhaps driven by 'mom and pop' stores, may see similarities in what might be happening a few years from now in their markets.
Why are there so many empty shops?
Apparently there are 5,400 places in UK called "High Street". Think about one near you, and think about how it has changed over the last decade. 5 years ago you may have been worried about the ubiquity of some of the major chains on that High Street - too many McDonalds, Costa Coffees, or Top Shops? But now the bigger concern is empty premises - for every 5 shops occupied, there is 1 vacant. That's down to falling sales, which is at least partly due to reduced footfall on the high street - outside of London, footfall has fallen by 10% in the last 3 years.
According to the figures, less than 50% of retail spending is on the high street, and this has fallen by almost 20% in the last 10 years, primarily at the gain of out-of-town and online.
Although online accounts for only 10% of retail sales at the moment, it is a huge growth channel, and mobile commerce enjoys even higher growth - 500% growth in the last 2 years.
And this ties up with my experience - what about yours?
3 years ago, I rarely made online purchases. What if something was wrong? Where would I take it back? How trustworthy is the payment system? What will this online retailer do with my details?
Now most of what I buy is online, either through what used to be called "Clicks and Mortar" retailers (think John Lewis), or through online-only retailers (think Boden or Amazon). The latter category didn't exist that many years ago, and now there are huge online brands competing for your wallet.
And I buy on mobile devices too, like the stats suggest, usually through a website that's been tweaked for an iPhone or similar, to make it easier to use (in fact, I've got to that point now where I'm annoyed if a web site is cumbersome on my phone, which is something I used to accept not that long ago).
And what's wrong with that? With their ease of use, ability to compare prices, often excellent delivery service and returns policy, online shopping is exactly what I'm looking for a lot of the time. Why try and push me back onto the high street for those things? I'd probably end up buying less overall.
Is the High Street really dying?
Given all of the above, and their own personal experiences walking through town, I don't think anybody could argue that the High Street is in good health. There may be streets in West London that have a thriving ecosystem of boutique outlets, but for each of those there are maybe 10 streets in market towns around the UK that seem to be made up of only betting shops, pound shops, and empty premises.
Because of online and out-of-town, the footfall in the High Street is decreasing, and that undoubtedly leads to a spiral of decline if left unchecked.
What Phoenix will rise from the ashes of today's High Street?
Portas recommends a number of sensible things such as encouraging/coercing landlords to be more responsible, driving collaboration on the high street so that it becomes organized more like an efficient, coherent corporate than a valiant band of independents, and aligning policies in areas like planning to support the high street, not act as a barrier. I'm less convinced by a few, such as the cheap market stall ideas (these people will already be using eBay, won't they?), but overall the review gives plenty of actionable recommendations.
And I like the Pilot/Proof of Concept idea - at Bluefin Solutions we often advocate this approach when working with customers to enable their business visions using SAP technology.
Let's imagine that all of the recommendations in the Portas Review are taken forward, and they are all successful. We have a High Street full of specialist shops with attractive, available ranges, offering the customer a compelling 3D retail experience, and staffed with people that really know their stuff, and offer great service. The shops are paying a fair rent, and fair rates, and the parking is free.
What will footfall look like then? What will sales look like?
Nobody knows, of course, but I believe the key isn't just in updating the commercial retail mix, it's doing that in the context of the wider social forces at play.
What is the social role of the High Street?
Because of modern transport and communications, we spread our lives across a variety of different places. As Sean Carey puts it this open society leads to more optional, voluntary relationships that are emotionally thinner.
This presents the High Street with an opportunity to play to the basic human desire of belonging to a community and a place by providing a more tangible social experience than online retail can provide.
To make the most of this, the High Street needs a subtle change of tone to the retail experience compared with the one that my parents would have had when I was a lad. One that means coffee shops are probably more important than they used to be, and one that might also have an impact on the built environment, encouraging people to meet and linger, rather than just buy and leave.
One driver that I don't hear many people talking about in the context of the Death of the High Street is homeworking. Apparently the number of homeworkers has grown by 24% in the last 10 years to almost 4m people in the UK, which is 13% of the workforce. Almost by definition, most of these will be online (and therefore have a high propensity to buy online). But if they're anything like me, they'll want to pop out and have a coffee and a chat from time to time. And might be tempted to buy something while they're out and about.
Another trend is the ageing population - the 65 and overs are going to grow in number substantially. Do they present social and commercial opportunities on the high street that are not currently captured?
How can technology help? Where do SAP HANA and SAP BPC fit in?
Clearly for the corporates that are brave enough to tackle the high street, planning and analytics on top of big data are key weapons to win the battle. I can easily imagine scenarios where business plans are made and revised with high frequency - reacting to very granular information - in an enabler such as SAP BPC on SAP HANA. I can also imagine scenarios where POS data is trawled every day, and intraday, again on SAP HANA, to drive the very last bit of performance into every store to maximize results. And of course this will be played out on mobile devices.
Thinking more socially, what benefit could be had from monitoring sales, inventories and automated footfall stats with reference to social media buzz, in real time? With the right in-store electronic labeling, promotions could be optimized in a much more specific and effective way to drive the right sales for most profit.
And if we're going to do more on our mobiles, why not be mobile on the high street? There are widely documented examples of QR code functionality and the like in busy transport hubs - why not take that kind of thinking onto the high street and apply it collaboratively across multiple retailers? Drive footfall more proactively across different banners so that it generates a virtuous circle, not a death spiral.
I'd be interested in your comments. Do you see the same things in your high street? Should we care about the high street? Or should we let it die off and be replaced by whatever the market dictates?
Dan Hawker 29 Nov 2012
Thanks for your comments Craig and Thierry.
I agree with you, Craig, about the fast-changing nature, especially around "Big Data". The key questions with SAP HANA are around how big is "Big", and how fast do the decisions need to be made?
Thierry - I agree with you about knowing the customer. It's amazing that people walking into a store they've been in many times before, are treated as if they've never been there before! 5 years ago it wouldn't have mattered, but people's expectations get greater every year...
Craig 26 Nov 2012
Great thought provoking article. I came across this by accident.
There are already trials happening on the high street - with collaboration between Facebook and Next - mixing face recognition with likes listed on facebook to provide a personalized shopping experience.
I agree that using something like Hanna would be brilliant for retail to gain new insights into what and how people are using the stores.
My only issue is that I am not sure that Hanna is keeping pace with the competition - Hadoop seems an infinitely more powerful and adaptive platform, Splunk. I am a SAP fan and fully support your article - I am not convinced that Hanna is the right tool in a rapidly changing world of big data.
Thierry Crifasi 01 Nov 2012
I agree with you that Forecasting and Planning capabilities supported by SAP HANA and BPC can help retailers fight back in the High Street. The main comment I want to add is that The Portas review seems to be targeted at Shopowners/Retailers. As a result the technology solutions you have mentioned are mostly seller centric.
The blog mentions many customer centric explanations for customers not visiting High Streets as much as they used to.
I believe one not mentioned is the lack of proper Customer Engagement. If you think about it, many multi-channel CRM implementations deal relatively well with seamless customer engagement across multiple channels such as Contact Centres, eCommerce, Email or SMS. Few manage to extend this engagement inside stores where the customer is very often an unknown entity. I wish more stores would know me better like a few pure online or hybrid retailers do!
Technology like SAP CRM can help with this customer engagement. It seems to me the barrier to extending CRM systems inside stores have at least 2 reasons:
- A large number of Retailers don't have the ability to identify customers with their current systems and processes. In the US, 1/3 of customers are in this situation. I can only imagine UK being worse off. (see this research http://www.marketingcharts.com/wp/direct/3-in-10-retailers-unable-to-identify-customers-at-the-pos-20948/)
- POS systems are not integrated with customer engagement systems such as SAP CRM for "real-time engagement" even though I believe all the building blocks are there to achieve it.
An example of SAP-based solution is the recently announced Cloud-based SAP Precision retailing solution (http://readwrite.com/2012/10/04/saps-creepy-new-retail-software-uses-big-data-make-you-buy-more-stuff) which combined with SAP CRM on HANA (announced next month) could help save a few High Street shops.