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Anybody who has worked in the retail sector knows that consumer trends can significantly affect the market; this could be in the form of a recession where you struggle to get customers through the door, or the release of a new toy that every child needs for Christmas, causing huge lines outside stores. Anybody who is interested in working in the retail franchise sector needs to understand that you may not be able to stop these shifts, so you must learn to adapt to them.
When the UK was in the midst of the recession, the economic climate was less than optimal for retail franchises. The recession affected most people but the biggest shift in the market was to the way in which the middle class changed their spending habits. Everybody was aware of the big 4 supermarkets, as most were likely to shop there but, during the recession, there was a surge in discount stores, like Poundland. Many ‘sacrificed’ their high-end luxury products and adapted to the financial climate, purchasing cheaper alternatives at the super saver stores.
This shift resulted in decreased earnings performance of big name stores but lead to a massive incline in frugal spending habits, therefore, a rise in discount stores.
You only have to reflect on the performance of Amazon to understand the potential of eCommerce or online store franchises. Jeff Bezos, the founder, chairman and CEO of Amazon, was briefly the world richest person, until he was replaced by Bill Gates, not long after. Even though it was short lived, it demonstrates how much money is in retail, proving the relevance of eCommerce, despite the fact that online retailing only contributes to around 17% of the overall retail market. Online stores are performing well and are on a continuing rise, but what is driving this trend?
One of the biggest factors, which is driving online trade, is how accessible and convenient it makes shopping; you no longer have to travel to buy your products, all you need is a device with internet access. Huge shopping malls where you can buy anything from one space, still perform well as some aspects of shopping are better experienced in a physical store e.g. you can’t try on shoes before you buy them online. This, however, is also being combatted by online retailers by offering a free returns policy, this works similarly to ‘try before you buy’, as long as you remember to return within the allotted time.
The video gaming industry in the UK is on the rise but not necessarily for everybody. The biggest platforms such as PlayStation and Xbox now have enough storage space on their devices to download and store games, instead of the need for a disk to store games. The increase in storage has directly driven software downloads of games, as people can now choose between going out and buying a disk of a game or just visiting their platform’s online market place and download their game at a click of a button. This, alongside the rise of popularity amongst video games, has propelled gaming as the biggest entertainment market valued at £99.6 billion in 2016, with the UK at £4.9 billion in 2015.
This increase in digital downloads has affected brick-and-mortar video games stores, however, one type of store is still performing well and improving in these times. Video game resellers, such as the CEX franchise, buy used products then resell them onto new customers for a used, discounted price; this model is doing well with the CEX franchise increasing across the country, as it offers a low-cost alternative for some of the best games on the market.
No matter what shopping centre you go to in the world, it will never be able to compete with the number of products available online. If you need several products from one shop, then you can still see the appeal of physically going into a shop but, before you know it, you’ve been in 10 other shops to gather everything on your shopping list – why bother travelling when you can just go on your laptop?
Two of the fastest growing markets in the UK over the last couple of years, are the Health & Beauty and Jewellery markets. These two markets are both dominated by sales from females, or for the use of females, and are receiving some of the biggest growths, with Jewellery reaching 7% growth and Health & Beauty at 5.7% for 2016. The shifts in the market that is driving this growth in these sectors, is the increase in demand for premium products and the utilisation of the internet to aid in sales from overseas.
The above information demonstrates that this market is highly influenced by shifts in the market, however you will also notice that there have been some clear winners. The market as a whole is healthy and will continue to be, however, the increase in online performance will likely lead to the detriment of physical franchise stores.
Overall if you are a savvy business person who is able to shift with changing market trends, you can perform well in the market, whether it be an online retail franchise or physical retail franchise.
If you are interested in this market then check out our Retail Franchise Opportunities