Tag Archives: distribution

Are ‘dark stores’ bringing some much needed light to the high street?

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As we pass the first anniversary of the initial lockdown and look towards opening things up again, will we see a change in footfall trends in favour of the high street as people yearn to get out again, or will it continue to experience a downward trend?

Judging by pre-pandemic trends, it would seem that high street businesses will need to do more than just open back up to entice people back to the high street. Indeed, there were signs of diversification on the high street before the pandemic in response to declining footfall. And the pandemic has led to many more innovating to survive the current challenges, such as creating pop-up ecommerce centres. Perhaps such moves could help save the high street, albeit not as we know it.

A downward trajectory

The recent news of permanent closures of big-named high street stores such as Debenhams, Laura Ashley, Top Shop and Dorothy Perkins after the collapse of Arcadia Group, and the closures of more John Lewis outlets, suggest a bleak outlook for the high street. And the pandemic has spurred the worst decline on record.

Recent figures from PwC reveal that an average of 48 stores, restaurants and other leisure and hospitality venues closed every day in 2020 – a total of more than 17,500 outlets.

This may be the worst decline on record but it is also a continuation of the downward trajectory that the traditional high street was already on. And it has been argued that this is actually a reflection of things that happened pre-pandemic, with its full impact ‘yet to be felt’.

In its quarterly footfall monitor, the British Retail Consortium highlighted in May 2019 that high street footfall had fallen by 1% year-on-year and that vacancy rates on local high-streets had risen to 10.2%, equivalent to one in ten shops having succumbed to the high street crisis. This was the highest vacancy rate in four years and it continued to increase in the next quarter.

Support through a crisis

It has become clear that trends before the pandemic have just been accelerated by it. The continued growth in online shopping and the impact of government policy costs such as business rates are just a couple of the causes of the decline in high streets over the years that see little sign of abating. But the urgency of the current situation has seen a huge increase in government support across the board which has helped many businesses stay afloat as they try and wait out the storm.

In December 2020, the UK government announced it would invest up to £830 million from the Future High Streets Fund in local high streets across England to help them recover from the pandemic and drive long-term growth.

In September 2020, funding was secured for England’s historic high streets through the £95 million government-funded High Streets Heritage Action Zone (HSHAZ) programme, which is delivered by Historic England. The aim of this is to help transform and restore disused and dilapidated buildings into new homes, shops, work places and community spaces, restoring local historic character and improving public realm.

And just this month, the government has announced a series of new measures to support a safe and successful reopening of high streets and seaside resorts, including a £56 million Welcome Back Fund to help councils boost tourism, improve green spaces and provide more outdoor seating areas, markets and food stall pop-ups. This builds on the £50 million Reopening High Streets Safely Fund announced in May 2020. Similar support schemes have been introduced by the devolved administrations in Scotland, Wales and Northern Ireland.

Of course, this hasn’t been enough to save the high street stores that have announced closures. But it brings to the fore once more that high streets are about more than just shops as each funding programme highlights the aim of transforming high streets into vibrant mixed-use places where consumers can enjoy social experiences.

Adapting to survive – dark stores bringing light to the high street

As the PwC study suggests, it is really about keeping up with consumer behaviours that is the challenge for retail, perhaps even more so in times of crisis. And there have been many examples of high street retailers adapting to survive.

With the huge increase in online shopping during the pandemic, many manufacturing and distribution centres were operating at maximum capacity which led to some retailers unlocking the potential of their local high street stores to provide local distribution hubs, known as ‘dark stores’.

Lush is one company that changed the way they used their retail space so they could continue to use it while their stores were closed. It created Lush Local, a pop-up e-commerce centre which used the shop as a local distribution centre so they could fulfil local orders and not let their current stock go to waste.

Some businesses have also partnered with others to make use of local unused space such as Crosstown Doughnuts which have been trialling the use of dark stores in Cambridge and Walthamstow, partnering with independent operators so it can provide on-demand deliveries and collections to customers.

As ‘bricks and mortar’ retailers try to adapt to support their online capability, providing efficient local deliveries, at the same time as utilising their physical retail space, the ‘dark store’ trend may be here to stay. Pre-pandemic, it was reported that using dark stores and offering click and collect can reduce delivery costs and increase profit margins. Analysis showed that if deliveries from dark stores increase by 50%, profit margins could grow by 7% as a result of lower delivery costs and higher delivery throughput compared to conventional stores (while also not affecting store operations).

And it has been suggested that this model can be further adapted to provide ‘hybrid stores’ as shops re-open. These hybrid stores enable local stores to combine space for their fulfilment centre with their physical shop so consumers can still benefit from the tangible experience offered in store that can’t be replicated online.

Final thoughts

Only time will tell if recent innovations will have the desired effect. What is clear is that the rate of change cannot continue at the pace it was before the pandemic if high streets are to have a fighting chance. Dark and hybrid stores could be part of the answer. But much more is needed.

The most successful high streets, it is argued, will offer a mix of retail, entertainment, culture and wellbeing as they focus on the experiential side of things, because, in the words of retail guru Mary Portas, “vibrant, innovative, socially dynamic high streets will help this country not just heal, but thrive.”

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“The infrastructure of everyday life” – has the time come for the foundational economy?

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The last few years has seen growing interest in what has been termed the ‘foundational economy’ and its potential value for achieving economic security and social sustainability. Accounting for around 44% of UK employment, it has been argued that supporting this section of the economy could ultimately improve productivity. And the current pandemic has placed even more emphasis on the importance of the foundational economy – the part of the economy that cannot be shut down.

What is the foundational economy?

The foundational economy provides universal basic services built from the activities which provide the essential goods and services for everyday life, regardless of the social status of consumers. Primarily delivered locally, these goods and services encompass infrastructures, utilities, food, retailing and distribution, education, health and welfare. Because of this, it is thought to have considerable potential to regenerate the areas where the local economy is relatively weak – perhaps the perfect solution for the levelling up agenda?

The initial manifesto for the foundational economy from researchers at the University of Manchester resulted from dissatisfaction with generic industrial and regional policy focused on promoting competition and markets; with success measured in terms of job creation and GDP growth. According to the manifesto, the foundational economy is “the mundane production of everyday necessities” which is taken for granted by all members of the population. As such, it is often also referred to as the ‘sheltered’ or ‘invisible’ economy.

Scale and value

In providing the infrastructure for everyday life, the foundational economy is also very large. It has been noted that in all European countries, it directly employs around 40% of the workforce. In the UK, around 44% of the workforce is employed in foundational activities. In Germany, it is 41% and Italy it is 37%. The value of foundational output and volume and diversity of foundational employment is therefore much larger than in high-tech and tradeable services, with which policymakers are determinedly focused on.

Other measures of value have also been highlighted, such as household expenditure. The initial manifesto notes the importance of weekly spend on the foundational economy with nearly 30% of all household expenditure going on foundational activities.

Despite providing vital services, and employing a significant portion of the UK population, the foundational economy is marked by low-tech, low-wage, part time and often precarious employment and is potentially at risk from automation, despite the significant ‘human’ element to many of the different job roles which make up this part of the economy. Within society a lot of foundational jobs are still considered by many (often who don’t work in the sector) to be “jobs you move on from” where in reality, for many people, particularly women and migrant workers, this isn’t the case.

But where would we be without these roles providing for all citizens’ basic needs? Job creation and GDP growth may suggest a successful economy but this, it is argued, does not show the wellbeing of all society or sustainability. In the face of current, and indeed future, crises, it seems perceptions may be starting to change as more and more people become concerned with health and wellbeing and the environment. Indeed, it has long been argued that necessity is only recognised in times of crises.

Has Covid-19 shone a vital light on the foundational economy?

While many sectors were shut down due to the coronavirus pandemic, the foundational economy remained open as it was considered systemically important for meeting basic needs. The pandemic has highlighted that this part of the economy is needed at all times, including at times of crisis.

Healthcare staff have become frontline heroes and food delivery drivers are recognised as key workers. But this enhanced status has also highlighted the poor pay and conditions of many key workers delivering these essential goods and services and the inherent inequality that exists in society.

Just like other crises, from natural disasters to large scale economic shocks, these bear most heavily on the poor and vulnerable. The pandemic has shown that these inequalities must be addressed so that basic everyday services are more equally available.

The pandemic has also shown that economies are about more than market economies. It has been argued that there needs to be a move towards meeting a population’s basic needs rather than on individual consumption.

Way forward

Advocates of the foundational economy argue that public policy should focus on securing the supply of basic goods and services for all citizens in a socially responsible way.

The 2020 manifesto for the foundational economy from The Foundational Economy Collective argues for the renewal of the foundational economy with a ten-point programme, including proposals related to:

  • better health and care
  • housing and energy
  • food supply
  • social licensing
  • tax reform
  • disintermediation of investment from pension funds and insurance companies
  • shorter supply chains in foundational commodities
  • citizen engagement
  • better technical and administrative capacity at all levels of government
  • international constructive responsibility

It has been widely agreed that a return to business-as-usual approach following the pandemic is not the way forward and that there needs to be a shift in economic policies in order to achieve a more socially and economically just society. Perhaps if such policy change is achieved, a more balanced economy that provides a good quality of life for all can eventually be realised.

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