Will the high street recover once the virus finally recedes? Is there any hope for the future of the high street and what can investors do?
Is there any hope for the future of the high street and what can investors do?
Is the high street dying? Or will it recover? If the high street as a centre for shopping is on its last legs, what next? What are the producers for the high street? What does the future of the high street look like?
In times like these, it isn't easy to imagine things ever getting back to normal. The first full lockdown began in the UK on March 23rd, 2020. And an ending feels as distant now as it did back in March. Sure, vaccines are on the way, but think back to March 2020. How many people thought the crisis would last a few months only? I would wager that at first, most of us thought the Covid crisis would be over by the autumn. But one day, the virus will be defeated, and we will start mixing with people again. What then? Post-Covid, will things go back to so-called normal?
I like to think that mask-wearing will end; it would be nice to think that hand washing will remain more common. There is, of course, a risk that we let the so-called 'tyranny of today' cloud our judgement. Covid has changed things, but I think we overestimate how permanent these changes will be.
But some changes will be permanent, not because Covid has changed us in ways that were unpredictable before the crisis, but because it has accelerated that which was going to happen anyway.
Remote working is here to stay, but maybe not to the extent we saw during lockdown. I hear the comments everywhere — remote working is stifling creativity they say. What about those serendipitous meetings by the water fountain? Those comments have logic to them, but I think that those who utter them largely underestimate how creative tech companies can be in overcoming these issues. Take the way some companies are, for example, using technology to get people to take coffee breaks with randomised colleagues, via video calls.
And what has that got to do with the future of the high street? Quite a lot actually; remote working is hollowing out city centres. It is having a devastating effect on central London, for example.
Then there is shopping itself. We have been forced to adopt more online shopping, and not all of us like it. Shopping is partly a social pursuit, but clearly more people will be shopping online after Covid than they were before.
Linked to that is the cinema. I happen to be a fan of the cinema, but Covid has pushed many of us into trying online subscription channels such as Netflix.
Sir John Timpson, who founded shoe repair store Timpson has said that "The Covid-19 crisis will cause five years' change to our high streets in less than 12 months." I am sure you have heard an umpteen number of similar comments by others.
Post-Covid, more of us will work from home more of the time; we will shop from home more frequently and probably watch more movies from home.
I see dangers in this. There is a negative side to technology, and I often fear that it is sucking our empathy from us, making us less social. I watch a lot of Netflix on my iPhone — but that is so introverted. Going to the cinema is as much about companionship as anything else — not to mention an essential part of the dating ritual.
And I would say ditto, for shopping. My local shopping centre is a massive mall — it's good to go there when it's raining. Go there now, and I am tempted to quote the 1980s band The Specials and say: "This town is becoming like a ghost town."
I am not so sure that the death of the high street will be so good for the social side of us.
The decision by John Lewis to turn 45 per cent of its store into offices, illustrates the problem.
I really, don't understand this move. People are flocking away from London offices just as rapidly as they are ditching the traditional retailer.
We are going to see more and more former retail space turned into residential. The implications are enormous. Property prices in large city centres like London or Manchester will be hit hard. Rents will fall. Landlords will be among the victims.
Local high streets
But some believe that the city centre's pain will be the local high street's gain. The argument goes like this: remote working will mutate into a kind of compromise. Employees will continue to work remotely, but not only from home, but from local co-working centres geared up to support team-working at a distant.
And if less people work in city centres, that means more people using the facilities near their home. So maybe local stores and cafes etcetera will boom.
Fast fashion versus sustainable
There is also the issue of fast versus sustainable fashion. Primark was perhaps the high street's biggest commercial star before Covid.
But Primark is about fast fashion — I wonder whether that too is on its last legs. Fast fashion is linked with climate change, of unsustainable drain on resources. The time for sustainable fashion may be approaching, and I think Covid has accelerated this.
But there is a simple truth — online shopping requires less physical space than traditional shopping — because warehouses make more efficient use of space. Remote working will utilise less real estate.
These changes will free up a considerable amount of real estate, previously used by retail or offices. Commercial property will fall into a deep recession.
But if more real estate is available for residential, won't this hit house prices and rent? I believe it will. The housing market is in for a massive shock. This change is not necessarily bad news for builders — their margins may be protected; it is land lenders and land banks that will be hit.
But online shopping creates the pressure on the supply chain. In the 2020s, none of us will be happy about having to stay indoors waiting for a delivery.
Instead, we will see the growth of pickup points, from local lockers to local mini-warehouses. Our local shops will increasingly turn into local delivery stations. But we may see ecosystems emerge around these local warehouses. Cafes and restaurants, for example, will form part of this ecosystem.
The high street will have to experiment. Retailers will have to try new ideas. Popup shops will become more popular. Landlords will have to adjust. Increasingly, rent will be in the form of revenue share. This will encourage experimentation and who knows what ideas may work.
But the big change that is set to follow relates to extended reality — virtual and augmented reality.
I see both technologies being applied to remote working. We will communicate with colleagues avatar to avatar or hologram to hologram?
As for retail — we will do more shopping in extended reality and will be able to try clothes on virtually, on our avatar?
Augmented reality provides the biggest hope for traditional shopping — albeit traditional shopping with a twist. In time, before we go out, we will don our augmented reality glasses or contact lenses. As we shop, we will see options displayed — product availability, colours, add-ons, similar products, etcetera.
"Virtual reality and augmented reality may add £1.4 trillion to the global economy by 2030 as well as the benefits it may bring to industries including manufacturing, healthcare, energy, retail and training and development," says PwC.
I think the first thing investors need to do is understand what is happening. It is easier to see that investments you should avoid than make.
But I would say look to sustainable fashion, extended reality companies and look at retailers which are embracing these changes. Try the products. Which online stores provide the best services? Think about how companies can adjust and whether they are proving to be up to the challenge.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.