A mixed box of thrift and indulgence
The subscription model in e-commerce and beyond
Before digital entertainment became a roaring success, subscriptions were synonymous with inflexibility and lock-in. But the disruptive impact of cloud computing and subscription platforms – the key technologies enabling a new type of media consumption – didn’t stop at music and film streaming. It has also spilled over into physical e-commerce, and is now filtering on to insurance and banking, a hybrid model postioned somewhere between payment per transaction and old-fashioned subscriptions.
In this new format, customers can throw caution to the wind and subscribe and unsubscribe to their hearts’ content, in the knowledge that there will be no traps hidden in the small print. They can even set the payment and delivery intervals that best meet their needs.
For some time, it seemed that this new-found flexibility would allow for any product to be sold on a subscription basis.
Some examples lent themselves more readily to the model than others: not many find any thrill in buying regular supplies of household staples or dragging heavy petfood bags into their cars, while many others view replenishing their personal care items as a necessary inconvenience. But other subscription ideas might sound convoluted and wasteful. A monthly pot plant subscription, for example, makes sense only for those bent on not lifting a finger, green or otherwise, to extend the lifetime of their existing organic interior decor.
Although subscriptions have proved to be a clever way of getting a foot in the door on a crowded market, seeing them as a secret recipe that can turn any business idea into an overnight success is flawed.
Added value is key to the commercial sustainability of the subscription model
The Dollar Shave Club, an oft-quoted example of replenishment subscriptions, could become a real success because it has redressed an anomaly on the market: even its premium subscription razorblades sell at half the price of the cheapest Gillette equivalent, the brand previously dominating about 60 per cent of the US market.
The 15-20 per cent savings that Amazon’s Subscribe and Save offers also make a great case for a long-term commitment, especially as it’s eased by “skip or cancel delivery” options. Subscriptions are also natural tools for brands that opt for selling directly to their customers and building a more intimate relationship with them based on loyalty.
Another area where subscriptions could provide a solution to a persisting problem is insurance. In a survey, Cuvva, an app-based car insurance provider, found that 62 per cent of respondents “feel comfortable trying out new subscription-based models for products [such as] insurance.” Here the flexible monthly subscription model, often combined with telematics and revolutionary usage-based schemes, removes the interests paid on monthly instalment schemes, as well as fees for changes and cancellations typical of traditional insurance policies.
Box subscriptions and the element of surprise
Regular curated box deliveries comprise a big chunk of e-commerce subscriptions, until recently at least – according to a McKinsey report they accounted for 55 per cent in the US in 2018. But although the hype over meal boxes and recurring deliveries of a surprise assortment of clothes, beauty products or snacks seemed to have been fizzling out by 2019, the pandemic, with non-essential shops and restaurants closed, has given them a new lease of life. In their case, the added value is that the recipient doesn’t exactly know what is inside. The excitement these deliveries generate is the direct opposite of the humdrum of regular top-up orders.
But the novelty can quickly wear off. Although for vendors, the undeniable benefit of subscriptions lies in a predictable revenue stream, churn rates with box subscriptions can get as high as 40 per cent. Although most of the time the first order is preceded by drawing a customer profile of needs and preferences, the chances of a miss or two per delivery are baked into the model.
But on a market awash with products, the job of finding the best available option suited to customers’ needs remains a strong proposition. There are entire new markets for box subscriptions to expand into, many of them with the potential of improving the sector’s sustainability credentials. Supplying a regular and renewing selection of vegetarian or vegan products unavailable in supermarkets or curated groceries that come in widely recycled or plastic-free packaging can save environmentally conscious customers a lot of time and effort.
The close engagement between customer and brand that the subscription model provides can also present a great opportunity for companies that aim to differentiate themselves by taking responsibility for the post-consumer waste of their products through recycling or refilling.
Whether the subscription economy will eventually complement its thrift and gratification features with an environmental sustainability strain is still unsure. But there will certainly be new areas such as insurance and finance experimenting with the model, and the average number of subscriptions per person and the complexity of managing them are also expected to grow significantly.
Although banking hasn’t exactly made the plunge into the subscription model yet, it has already dipped a toe by offering subscription management services. Visa and Mastercard merchants, for example, are notified before free trials turn into subscriptions, and Revolut, a novobank, offers a dashboard solution where all subscriptions can be seen in one place. These and similar apps can serve as simple but effective tools towards cutting the billions of pounds estimated to be wasted on subscriptions that consumers accidentally took out or forgot to cancel when they no longer needed them.
Today more than half of Brits have three or more subscriptions. If the sector is to expand at the breakneck speed forecast by business intelligence company Junniper Research (to over $263 billion by 2025 only for physical goods), staying on top of subscriptions – especially flexible, on-and-off ones – will become challenging for consumers. Unless subscription providers address the issue, this growing complexity may defeat the third major purpose of the model in addition to savings and surprise: convenience.
Zita Goldman
Author at Business Reporter covering digital transformation with a focus on demystifying digital technologies and showing how they fit into a broader sectoral, macroeconomic, legislative and societal context.
She has a passion for connecting the dots of current business and financial news and explain any inconsistencies, for giving hypes a reality check and looking behind buzzwords for fresh meaning.
https://business-reporter.co.uk/author/zita/
Discover the power of social media: how to use Instagram micro-influencers in e-commerce
With nearly half the world’s population using social media every day, any business needs to take this channel seriously. And most do. Well over half of small businesses in the UK use social media for marketing purposes, while in the USA the percentage is even higher, at 77 per cent.
Social media for marketing
Using social media for marketing and sales isn’t complicated. But, like any business activity, it takes knowledge and discipline. Most of all, it takes an understanding of what you are trying to achieve.
And social media is a very flexible channel. It can be used for launching a product, making sales and servicing customers. And it’s particularly valuable for brand-building because by its very nature it helps businesses create awareness and establish trust as people actively talk about your products.
When most people think about social media marketing, they think about Facebook and YouTube. It’s true that Facebook is a dominant force on social media, with 2.5 billion monthly users, while YouTube isn’t far behind with two billion. But there is another platform that must also be considered: photo and video sharing site Instagram, with over one billion users a month. (The other commonly mentioned platforms – Twitter, Pinterest, Snapchat and LinkedIn – all hover around the 200 to 300 million mark.)
Influencing with Instagram
So why use Instagram in preference to, say, Facebook, YouTube, TikTok or even relative newcomer Clubhouse? It depends on what you want to achieve. There is no single “correct” social media platform for marketing.
But Instagram does have some significant advantages. Users are very regular, with 63 per cent of them loggin on once a day or more, and a further 20 per cent once a week. And they are very active, with 500 million stories being posted each day. Compare that with Facebook’s 350 million daily photo posts.
But there is more than marketing reach to consider. Because it is focused on photos and short videos, Instagram is a very effective environment for business, helping showcase brands by humanising content and inspiring audiences. User behaviour bears this out: 90 per cent of Instagram users follow at least one business and 83 per cent say they have discovered a new product on the site. In addition, brand engagement is very high – 10 times that of Facebook, 54 times that of Pinterest, and 84 times that of Twitter.
Businesses are further assisted by the way Instagram makes it easy to communicate with other users. You don’t need someone to be following you, as you do with TikTok, to send them a message. And Instagram has many helpful editing options, such as templates to improve the effectiveness of posts and filters to improve photos.
This is especially true with Instagram “stories”. These are short-lived (they disappear after 24 hours) but prominent posts and they come with a wide range of tools that encourage engagement, including modules that let you ask questions or set up polls, and an interface that makes it very easy for viewers to message you directly.
Hashtags on Instagram
Another crucial difference is the use of hashtags. Hashtags have always been important on Instagram. They work by organising and categorising photos and videos. If you add a hashtag to a post on a business profile, it will then appear on the corresponding hashtag page. Hashtags on Instagram are a bit like search marketing: people use them as a way of discovering content and so using the right hashtags can mean that your content gets in front of your target audience, even if you haven’t connected with them before.
Obviously finding the right tags to add to your posts is important. Instagram makes hashtag research easy by showing you related tags. Importantly, it also shows you people who are using those hashtags. And these people may be important influencers.
Using micro-influencers
Influencing is big business on Instagram. You don’t need to post videos to make money, as you would on YouTube because Instagram gives a lot of power even to posts that use photos. Those photos combined with a perfect post description that uses hashtags can reach much more people with interest in those products or services within the niche. When you see on social media several voices from one niche talking about a particular product or service, this will create a need, and you usually want to try that product too, as it's already validated by your social group. This makes it popular with people who want to partner with businesses on social media.
Some profiles on Instagram have millions of followers. But these can be expensive to use commercially, costing thousands of US dollars every time a hashtag that points to your products is used. As an alternative, many agencies such as intelliRANK feel that it’s more effective to use micro-influencers.
Micro-influencers are not professional influencers but can engage with your customers in a compelling and authentic way. They are real people, with 1,000 to around 100,000 followers, passionate about their hobbies and interests, that use Instagram to share their experiences and knowledge. And while many of these will expect folding money to tag your business in one of their posts, a good number will be prepared to do so in exchange for free goods instead. And that’s the golden opportunity with Instagram.
Micro-influencers who accept free products will do so on the understanding that they write about them honestly, sharing thoughts with their followers and tagging your brand in the process. Their posts will come across as genuine and credible, because that’s what they are – the lived experiences of people who have used your products. And, with the right incentives, they will let you use the images they have shared on Instagram in your own content, such as blog posts, Amazon adverts or tweets.
Credible content, seen by people who are interested in what you have to sell: micro-influencers can be a powerful way of building awareness and brand favourability.
Setting up for e-commerce on Instagram
Any business wanting to use Instagram for marketing needs to start by setting up a business profile and ensuring it reflects the business’s values and strengths. With this in place, the next step is to research what hashtags your target audience are using and then to develop content relevant to these hashtags.
With this basic strategic work done, it’s time to identify appropriate micro-influencers – people who are posting content that is relevant to your business and who would be willing to do more in exchange for free goods. After you have partnered with them, you will need to support your campaign, engaging with their content and their followers.
Some sales will come organically from this activity. After all, half of consumers depend on recommendations they find on social media to inform their purchasing decisions. This is a major plus if you've just launched a product or a service and you have no social proof yet. But this is above all a branding opportunity, designed to get feedback from users, promote awareness of your products, and strengthen the credibility of your marketing messages through social proof. So don’t measure the quality of your campaign on the number of sales directly generated or you may feel disappointed and abandon a highly effective marketing tactic that should be part of a wider marketing strategy.
There are many other strategies that you can use to move from branding into direct sales online. For instance, Launching and Ranking services will get you exposure on Amazon by promoting your products in front of product testers.
Micro-influencers on Instagram represent a highly cost-effective tactic that can be targeted with laser-like accuracy and used to build substantial brand credibility, brand awareness and social proof for your products, services and business overall. For small businesses planning to expand their e-commerce activities, it is not only a practical first step but one of the most valuable opportunities that will be open to them.
This strategy was tested, validated and applied successfully by the founders of intelliRANK Agency, Marcel Marculescu and Larisa Herbai. They are offering intelliRANK’s free guide to using micro-influencers on Instagram available here for those who want to start the Micro-Influencers Program on their own.
How retail giants could thrive on the post-pandemic high street
Even before Covid-19, the British high street was undergoing slow and painful decline. Independent shops were struggling, department stores were fighting for survival, and well known chains were scrapping over market share.
A year on from March 2020, and shopping habits have changed drastically. “Non-essential” stores have been closed for months at a time, and online spending has soared. In 2020, e-commerce accounted for more than 30 per cent of retail sales in the UK for the first time, up from 20 per cent in 2019. Such a large increase in one year is unparalleled.
So has Covid-19 changed everything? Or did the pandemic just rapidly accelerate changes that were already being planned?
Take the John Lewis Partnership for example, the employee-owned company often seen as a reliable indicator of the state of UK retail. It recently announced a £517 million annual loss (the first in its history) and plans to close more stores.
Its CEO, Sharon White, has certainly had a challenging time since taking over in 2019, responding to a massive increase in online demand, and an economy battered by uncertainty.
Her plans to “re-purpose” company-owned premises and develop small-format John Lewis stores within Waitrose supermarkets may appear a brave response to changes brought about by the pandemic.
Yet earlier in 2019, John Lewis had hired a specialist company with expertise in “repurposing retail real estate” to oversee its “facilities management”. In other words, it was already thinking about new ways to use the property it owns. So perhaps such changes were not unplanned.
Another British stalwart, Marks & Spencer, has also announced a major change in its operations – by creating a one-stop shop for fickle customers and stocking competitor brands. These will include Jaeger (which the company has bought), Hobbs, Joules and Sloggi, which will all be sold alongside its own label items.
This strategy is a smart move, creating a single destination where shoppers can browse different designers, styles and prices. Offering branded and own label goods enables them to better compete with e-commerce specialists and win back lost market share.
It is a necessary departure from the inefficient and outdated notion of chasing an M&S “core customer”. Instead, the company has accepted that it needs to appeal to consumers who defy strict categorisation. And after a deal to supply the online grocer Ocado, M&S gains the huge benefit of access to that company’s informative data base which will be instrumental in their understanding of customer behaviour.
This behaviour, known in the industry as consumers’ “activities, interests and opinions” (or AIOs) is extremely important, with or without a pandemic. As my own research has shown, to be successful, retailers need to constantly think about brand identity, consumer behaviour and the impact of globalisation and regional trends.
Following trends
This can be seen in the changes announced by John Lewis and M&S, which echo a broader trend in the US, where retail giants like Nordstrom and Macy’s have been experimenting with the way they sell. Significant changes include the establishment of small scale and “inventory-less” stores – shops which do not carry full ranges or stock and operate more like showrooms, where purchases are followed by home delivery or collection.
These stores also offer services such as styling, alterations, tailoring and regionally specific product lines. They can also offer exclusivity and expertise, as was the case with the award-winning Sneakerboy, which opened in 2013 in Melbourne, Australia, selling rare and limited edition products without stocking inventory.
The fashion for inventory-less stores and localised flexible retail solutions was influenced by the success of the 2011 opening in New York of Story, a store which regularly changed its product theme.
Founder Rachel Shechtman (who went on to become “brand experience officer” at Macy’s, and shape its small-format strategy) explained: “Story has the point of view of a magazine, everything changes every four to eight weeks like a gallery, and it sells things like a store.” She added: “A magazine tells stories between pictures and written words, and we do it through merchandising and events.”
A shift to this small-format shopping is also being driven by the popularity of “direct-to-consumer” brands, which sell online, via their own stores and pop-up stores.
Department stores are also now competing with direct-to-consumer brands who sell online and via their own flagship stores without employing a more traditional wholesale approach. They are free to operate in a far more agile manner, using social media as a rapid feedback loop with customers.
This kind of agility is now being forced on languishing UK department stores, where development strategies planned for years are now having to be achieved in months. Dramatic shifts in consumer behaviour due to lockdowns expedited these changes at a dizzying pace.
But these changes do not necessarily mean the future is gloomy for traditional well known retailers. It does mean though, that they need to be open to a variety of solutions.
Online shopping is not the only option. Small formats which focus on products and services for their customers’ varied lifestyles allow greater flexibility to market test solutions that work, at regional and local level. To survive post-pandemic, businesses must consider which elements of “retail theatre” they wish to provide to remain relevant.
Tamsin McLaren, Lecturer in Marketing, University of Bath
This article is republished from The Conversation under a Creative Commons license. Read the original article.
Open for business: Why the retail sector needs to keep evolving to survive
History tells us that the retail sector is resilient and filled with innovative people. The internet was supposedly going to finish off the high street; but instead brands now look to meet consumer demand with omni-channel retail experiences, combining bricks and mortar shopping with the latest online platforms.
The current recession, triggered by the global pandemic, hasn’t quite reached the depths many have predicted - yet. But the retail sector, and high streets in particular, have been disproportionately hit by government-enforced shutdowns. Many are struggling in the current climate. For instance, Scottish retailers lost £1.9bn in sales in the first four months of the COVID-19 pandemic.
However, the sector is nothing if not agile and innovative. But there are conflicting fortunes within the retail sector. For instance, food sales were up 3.3% year-on-year in July (and an average of 8% in the previous four months). And while they have been affected by the reopening of the hospitality sector, food sales remain solid and have benefited from a strong online offering. Figures out from Waitrose show 77% of British consumers now do at least part of their grocery shopping online.
As with all times of economic hardship, success stories emerge as businesses adapt to new market conditions. In this article, I will take a look at the significant part marketing will play in the retail success stories that will emerge as a result of the COVID-19 pandemic. And I will explain how the right promotions could save many of the retailers that find themselves in a precarious position in the future.
Define your market
Just as with offices across the country, retailers rushed at breakneck speed to digitise their business as lockdown took effect. For some, it was the creation of a new online offering that had previously never existed. Others rapidly updated and optimised their current online presence to deal with spiraling demand.
The enforced change to buying habits doesn't look like abating any time soon. Many people are still afraid to venture into crowded public places as frequently as they did before.
Now is therefore the perfect time to reassess your market and truly understand your customers. The digital marketplace has become even more congested, and as such it is increasingly important to define your customer.
My colleague Mark Dodds, chair of CIM’s food, drink and agriculture sector interest group, has said: “The issues for retailers going forward will be mainly internal and strategic. E-commerce for some of the high street retailers has not been their most profitable channel because of the large infrastructure and systems investment required. But the pandemic may have changed this and, as things settle down, online has the opportunity to become a more important profit stream.
“If retailers still believe that the money is to be made in store, where they can attract consumers with impulse buys, the role of the marketer will be to convince consumers that it’s safe and hassle-free to enter their stores. Depending on how government guidelines develop, this may be a challenging message to get across.
“If the future is online, then we will see a shift in spend from ‘traditional’ media to more personal and direct messages encouraging those who have not yet done so to give online a go.”
Invest in your brand
Defining your market is essential for large and small retailers. However, so is assessing your brand to make sure your vision and values are still relevant to your customer base, according to Jamie Malcolm, retail marketing consultant to among others Samsung, Red Bull and Watchfinder.
Jamie told me: "Spending a bit of time on your brand vision and purpose will be incredibly valuable. There will be pressure to attract customers and to spend money on advertising, which is understandable. However, if your brand is misaligned, you will miss your target market, which no one can afford to do in these challenging times.
“This brand assessment will also help you define your ‘why’, which will strengthen the authenticity of your messaging."
Build an emotional connection
The 2008 recession saw a change in customer demand. There was a greater emphasis on authenticity and purpose. Consumers wanted more from the brands they engaged with. They wanted an emotional connection. This hasn't changed as we go through the COVID-19 pandemic.
Jamie Malcolm added: "Brands need to build on the emotional connection they have established with their customers. For instance, local marketing is going to be vitally important. During the first lockdown, by necessity people relied heavily on and supported their local suppliers. Despite our globally interconnected world, there will be opportunities to build your business through your local market.
“Communities, both physical and online, will also be a vitally important channel for your brand. Just as people came together to help each other during the lockdown, as we advance this will continue to be the case.
“An authentic brand will be part of this community, not trying to sell but to support its members. Find your community, become part of it. This isn't going to make an immediate impact, but it will provide the building blocks for long-term survival and success."
Focus on retention
Relationships are the key to success for retailers in these challenging times. You will probably have an existing customer base: communicating with them is crucial.
This is perhaps not going to drive sales today. But doubling down on these relationships will build the emotional connection you are looking for. It is also likely to increase referral business, which is always valuable.
Maximise your high street experience
The lockdown has heightened the pressure on physical shops. Increased investment to meet social distancing measures and to protect staff, added to reduced footfall, has undoubtedly taken its toll on many well-known names.
However, physical retail remains important. In May, online share of retail spending was 33.4%. This reduced to 28.9% by July. So how can marketing help the high street retain its relevance and make it through these tough times?
Susan Rose, Marketing Director at Slaters, said: "High street retail has been amongst the hardest-hit sectors during COVID-19. Customer experience is now critical to the in-store approach for retailers, large and small. Organisations also need to increase their research to identify niche opportunities. There is a definite opportunity for independents focusing on niche markets.
“So many of the high street stores matched those in the out of town shopping centres. We now need investment to make the experience our primary focus."
The rise of retail-tainment
It’s time for 'retail-tainment'. The in-store experience now, despite the challenges of face masks and social distancing, has to inspire and entertain. If the transactional nature of the stores is reducing, then the entertainment factor has to increase.
The management of queues will be important. With a competitive market, retailers may find that people have little patience for waiting unless there is some benefit or distraction to keep them entertained and ensure that their customer experience is a pleasant one. If queues and one-way systems are the new norm, there will be less browsing and fewer impulse buys. The role of the staff will be paramount in managing expectations and ‘upselling’ once the customer is in-store.
The shopping experience now starts well before the customer walks through the door. Retailers need to ensure that whenever it does start, their customers feel engaged, important and happy to spend. The experience can go right back to customers’ email in-boxes where they should receive communications about what to expect when shopping in-store, how queues will be managed, and what steps retailers are taking to ensure a safe and happy shopping experience.
If retailers can take all this on board and develop engaging marketing campaigns to attract consumers and address any fears they might have, the retail sector could well surprise the analysts in the coming weeks and months.
If you’re a marketer in Scotland or in any UK region, find out how you can join CIM. Or take advantage of our online training.
Ewan Anderson
CIM Scotland’s board member and vice chair of communications
Up to 40 per cent of UK retail space is not needed – here's what can be done with it
Covid-19 has wreaked havoc on many retailers. Since tough new restrictions were introduced in parts of the UK during October, footfall on high streets, shopping centres and out-of-town retail parks has fallen: it is now down 32 per cent year on year, with regional cities bearing the brunt. Though retail as a whole has now recovered to pre-covid levels, many physical retailers are not paying rent, and some landlords are considering legal action.
But as dreadful as Covid-19 has been, retail had serious existing problems. The reality is that there is far too much retail floorspace in the UK. Dealing with it is going to be one of the big challenges of this decade.
The retail crunch
Retail employs more people than any other UK sector – about 2.9 million, two-thirds of whom work for the 75 largest companies, turning over around £394 billion in 2019. In recent years, these businesses have been wrestling with higher staff costs due to increases in the minimum wage; higher business rates (property taxes), especially for large shops in prime locations; a weaker pound since the Brexit vote of 2016, making imports more expensive; and online competition.
The UK already had the third highest level of online shopping in the world before Covid-19 (16 per cent of total retail spend, exceeded only by China and South Korea). Now online has become even more powerful, peaking in June at one-third of all UK retail sales. Wherever it settles, it will be higher than before the pandemic.
Thanks to online shopping and the other pressures on physical retail, as much as 40 per cent of shop floorspace may be permanently surplus to requirements. This is about 42 million square meters, equivalent to 175 Westfield Londons, 227 Metrocentres or 284 Bluewater shopping centres.
This helps to explain why Intu, owner of large shopping centres like Gateshead’s Metrocentre, Manchester’s Arndale and Trafford Centres, and Birmingham’s Merry Hill, went into administration in June. Many of its centres are now being sold or transferred to new management as the Intu Group is dismantled.
Other big landlords have struggled too. Hammerson (whose centres include Brent Cross, Birmingham Bullring and Bristol Cabot Circus), British Land (Sheffield Meadowhall and Drake Circus in Plymouth) and Land Securities (Bluewater in Kent, Leeds White Rose and Buchanan Street in Glasgow) have been on a stock market rollercoaster and face a similar dilemma with their oversupply of retail floorspace.
Mitigating factors
One silver lining of the pandemic has been landlords having to reframe their relationship with tenants. As proposed by the UK government’s voluntary code of practice, which came out in June, landlords must work with retailers for everyone to survive this period. This includes cutting rents to more sustainable levels.
For example, the market is seeing a return to turnover rents, where tenants pay a percentage of turnover rather than a nominal “market” rent unrelated to prevailing economic conditions. Such flexibility may reduce empty floorspace to a certain extent.
Another mitigating factor is that most retailers will still want some kind of presence on high streets or shopping centres. Indeed, the lockdown saw a big shift in domestic spending to local convenience and neighbourhood stores in the suburbs.
Retailers have also been blending traditional and online sales by encouraging customers to order for next-day home delivery or click and collect. This gives them another reason to retain a physical presence. At the same time, online retailers such as Amazon are opening high street stores to complement their offering.
The way ahead
Despite these innovations, there is still likely to be a large surplus of physical stores overall. So what can be done?
Some space might be used as offices, though the pandemic has seen a huge rise in remote workers, some of whom may never resume the office commute. Making stores into cinemas, restaurants or bowling alleys is hardly a solution either, when the leisure sector is among the hardest hit by pandemic restrictions.
Perhaps the most productive opportunity is to redevelop for a more varied mix of complementary uses – as echoed by leading retailer Bill Grimsey’s call to “build back better”.
In towns and city centres, this could include universities and colleges expanding their campuses; galleries, workshops and showrooms for the arts and creative sector; community enterprises and hubs; and health and wellbeing services which will be essential in the post Covid era, such as social care and mental health. Such uses could be assisted by public funding and landlords recognising that some tenants paying low rents are better than no tenants at all.
Some redundant buildings and vacant upper floors could also be turned into homes – echoing the return to urban living of the 1990s and noughties. The government could reintroduce the living over the shop (LOTS) scheme, which subsidised such conversions during that era.
Yet many buildings do not easily lend themselves to residential use. Utilities may struggle to provide refuse collection, water and sewerage connections, and parking spaces. Planning relaxations may sometimes remove the need for planning permission to change to residential use, but there are still complex building regulations, especially regarding fire protection and emergency access.
Traditional high streets also have multiple owners, who don’t always cooperate. Town centre managers and business improvement districts (BIDs) can help here, though we may need to see BIDs that levy additional business rates on landlords rather than tenants, like in Germany, to bring landlords to the negotiating table.
Shopping centres at least have the advantage of a single owner. As destinations in their own right, they are often regarded (rightly or wrongly) as too big to fail, particularly those woven into the fabric of city centres, such as Liverpool One or Eldon Square in Newcastle. Keeping them functioning will therefore be a high priority for the authorities.
Some out-of-town shopping centres had plans for new residential and leisure developments even before the pandemic. An example is the project to build 2,000 new homes around the Gateshead Metrocentre. The idea would be to reorientate the centre, diversifying the mix of uses to serve a wider community, though it won’t be easy to create new family homes in an environment designed around the car.
Such challenges are not particularly new: 25 years ago we would have called it “mixed-use regeneration”. This time it is driven by excess retail space, ironically much of it built on the former industrial sites that were regenerated in the 1980s and 1990s.
Paul Michael Greenhalgh, Professor of Real Estate and Regeneration, Northumbria University, Newcastle
This article is republished from The Conversation under a Creative Commons license. Read the original article.