Four reasons why high streets are the future

We were asked to write an article for London business magazine, Business First. The fate of our high streets is something that we spend a lot of time thinking about and arguing the toss over on these pages, so it was a natural topic to write about - it also gave us an opportunity to plug two of our favourite things: Brockley and Homemade London.

Our contention is that (recession notwithstanding) this is the most exciting time for London's high streets since the 1970s. Here's why...

Public debate about the future of the UK high street has intensified as the bodies of British retailers have stacked up. In May, Mayor Johnson launched a competition to find three London high streets to act as pilots projects, following the recommendations of the Mary Portas review. Meanwhile, more employees have been affected by retail failure in the first half of 2012 than in any year since 2008 and it’s on course to surpass that depressing benchmark by the end of the year.

The list of the biggest name retail casualties of recent years includes Clinton Cards, La Senza, Peacocks, Comet, MFI, Habitat, Focus DIY, JJB Sports, Adams and Borders. They range from local high street retailers to shopping centre regulars and big box brands.

Despite this grim backdrop, this is, perversely, the most exciting time for London’s high streets in decades. That is because high streets aren’t the common denominator in this misery – (bad) retailers are.

In fact, the high street is part of the solution for ailing retailers. In April, Tesco CEO Philip Clarke confirmed that his strategy to re-engage shoppers would involve rebalancing the portfolio away from big box Tesco Extra stores towards smaller format stores. It was the latest signal supermarkets are scrambling to deliver growth by returning to the high street. Jon Copestake of Retail Gazette explains the trend simply: ‘Sellers need to be where their customers are and not the other way around.’

For decades, supermarkets have been cast as the enemy of the high street, so the fact that they are now recolonising the locations they left behind might seem like dubious evidence of green shoots, but there are four fundamental reasons why London’s high streets have a bright future:

1. Fewer cars

Car use has been declining among Londoners since the 1990s.

‘The picture for the whole of Britain has been quite stable since the mid-1990s, but London is a very interesting case,’ says David Metz, of UCL. ‘[The number of car journeys per person] reached its peak in the early 1990s, has been declining ever since and it's projected to go on declining as the population keeps growing.’

Fewer cars means more demand for local shops and services, easily accessible on foot. This change is partly due to higher density development of the capital, which according to Christine Whitehead, Professor of Housing Economics at the London School of Economics, ‘traditionally generates more, but shorter, trips using more public transport.’ This brings us on to fundamental reason number two.

2. Smaller homes

Boris Johnson decries London’s ‘Hobbit Homes’ but London’s population boom has not been met by a house building bonanza. Our living space is shrinking.

The average UK new build home is smaller than the average Dutch or even Japanese new home. And London’s existing housing stock is being subdivided into smaller and smaller dwellings. As our living space shrinks, so we want to spend more time outdoors.

You can see the effect in action in my South East London neighbourhood, Brockley, where I run a community website. Where once the residents rattled around in nice big houses, and barely bothered with the decaying high street next door, newer residents are squeezing into flats and spilling out of their homes to spend time and money locally. Brockley Road is making a slow but steady recovery.

Businesses like Big Yellow (whose growth is driven by London and the South East) are responding to Londoners’ lack of room, but so are the cafes and bars that realise their real business is renting living space, rather than selling coffee or beer.

3. More time

The internet might be taking an ever-growing share of Londoners’ wallets, but in return it is freeing up time that was otherwise spent on drudgery. Since I discovered internet grocery shopping about three years ago, I can count on the fingers of one hand how many times I have set foot in a physical supermarket. My weekly shop used to take up one or two precious hours of weekend time. Now, it’s done on a phone during TV ad breaks. There is evidence that the cumulative effect of these kinds of lifestyle changes is significant.
In 2006, American academics Mark Aguiar and Erik Hurst showed that Americans have much more leisure time than they did 40 years before. As The Economist explained: “Appliances, home delivery, the internet, 24-hour shopping, and more varied and affordable domestic services have increased flexibility and freed up people's time.”

Having been given the gift of time, Londoners want to escape their poky flats and spend time and money on experiences. And if they’re given the option, they’ll do it locally. That’s why I disagree with the prediction of Philip Dorgan, a retail analyst at Panmure Gordon, who recently said, ‘The high street will become full of coffee shops, building societies, kiosks and hubs to pick up stuff. It's a different place from 10 years ago and I imagine in 10 years' time it will be a different place again.’

This is too reductive a vision. High streets also have a bright future as centres for the experiential economy. As digital channels hoover up more and more areas of retail, doing stuff will replace buying stuff as the primary function of the high street and in turn those same digital channels will facilitate the growth of thousands of new high street businesses. This brings us on to driver number four.

4. Unlimited customer reach

Digital technology has brought the cost of marketing down for high street businesses. Small independent businesses can now reach the whole of London for no or very little cost, thanks to social media, search-based advertising, daily deal sites (treat with caution) and CRM. That doesn’t just bring costs down, it opens up new possibilities, allowing high street businesses to target niche interests – and in a market the size of London, every niche is big enough to sustain a business.

Two years ago, I co-founded a small high street business called Homemade London. It offers unique experiences to people interested in trying their hands at everything from perfume- to lingerie-making. There wasn’t an established market for these kinds of experience and we had a tiny marketing budget to find our target customers, who were scattered across London. We didn’t know who they were and it had probably never occurred to them that their life was missing what we had to offer. Yet with a tiny marketing budget we have been able to grow a sustainable business.

Before the internet, we’d have needed much deeper pockets to make it work – most likely, it would never have existed at all. Back in Brockley, a local photographer decided to start a food market in a high street car park that was deserted at weekends. Through social media (and yes, a hell of a lot of leafleting) he filled the place on opening day and has turned it in to a weekly event that attracts people from miles around.

To encourage London’s high street renaissance, policy makers need to stop wringing their hands and do two simple things. Firstly, invest in the quality of the high street to create an environment where people enjoy spending time – plant trees, replace cracked paving and remove clutter. Secondly, stop obsessing about bringing ‘retail’ back to the high street and make it easier for experiential businesses to open – let shop space be converted in to bars, cafes and other places where people want to spend time and let informal spaces like car parks be re-used in creative ways.

Earlier this year, a San Francisco State University study found that ‘experiential spenders’ get more well-being for their money than ‘material spenders’. Encouraging the experience economy is not only the right economic strategy for London’s high streets, it will also make Londoners happier.