Over the last few months I have been spending a lot of time on high streets up and down the UK. Maybe others have noticed the transition over many years – but, for the first time, I observed a massive shift from traditional ‘retailers’ selling products, to high-streets filled with shops selling ‘services’: hairdressers, beauticians, vets, lawyers, dentists, funeral parlours, fitness studios, tattoo parlours and the like. In a 30-minute walk a few weeks ago around Wakefield’s City centre (it is not very big!), I counted over 60 hairdressers/barbers – and a similar number of beauticians…and all for a City of just 300,000 people.
Obviously, there are a number of factors at play here. From a ‘supply’ perspective, traditional bricks and mortar retailers are reducing their footprint and closing unprofitable stores (which hits a City like Wakefield hard) – therefore, it is only logical that landlords need to look for alternative uses for their space. Government data analysed by Altus Group shows 20,143 UK shops have disappeared between 2010 and 2019, resulting in a net loss of 5,289 shops. The good news is that one in three vacant high street shops will face new futures as hotels, gyms and restaurants. Service-led businesses are often not hugely capital intensive in terms of fit out – therefore the conversion from traditional retail is relatively easy.
Additionally, service-led businesses are often owned and led by entrepreneurs. These individual, enterprising, leaders see a market niche for a particular type of proposition in their local market – and back themselves, often with generous bank financing, or crowdfunding, to create and run their own business. Given they are usually local citizens, they can create propositions and a customer service ethic that is highly localised – in a way that a national chain often struggles to do. Additionally, because these businesses are owner-led and managed, they can be run with great operational efficiency – especially since there are no ‘head office’ or management costs to take into consideration – with the local customer at the heart of all decision making.
Whilst wider macro-economic conditions may be pushing the volume of service-led businesses from a supply-side, demand for these services is, of course, higher than ever before. Take beauticians for instance. Nationally there are now over 50,000 beauty locations. From April to June 2017, total employment in ‘beauticians and related occupations’ saw a massive 40% increase from the same period in 2016. This is partly driven by the technology allowing at home beauty treatments and a growth in spa and hair salons. According to Mintel, consumers in the UK spent £25.1bn on beauty in 2017 – the fifth highest in the world. It is estimated that the market will grow to £26.9bn by 2022. The growth has been driven by a combination of increased frequency of visits and salons attracting a widening demographic.
I recently caught up with new Toni&Guy CEO Nigel Darwin. His hairdressing brand is definitely benefitting from a boom in service-led businesses: “Businesses focused on selling products through stores are, in general, having a very tough time. Services, with products integrated into the services, are on an upward trajectory, in particular when aligned with macro trends favouring wellbeing, health and beauty, and experience. With around 175 salons in the UK, and a further 450 in over 40 global markets including China, India, Australia, France, and Italy, our global brand provides us with a huge opportunity.” With over 50 years’ experience in the market, Toni&Guy has become an international icon and a leader in the hairdressing industry. Nigel attributes much of their success to a relentless focus on training, ensuring that they can attract and retain the very best hairdressers – critically providing consistency for their clients. It is this excellence in execution that makes Toni&Guy the envy of the sector, where there are otherwise low barriers to entry. Nigel observes, however, that the challenge ahead isn’t necessarily just about training the best hairdressers – but also recruiting and training their teams to offer the very best client experiences in salon, and marketing to their customers in a truly personalised way. “We are privileged to have the best hairdressers in the world working with us at Toni&Guy – great creative, warm, energetic people. We are working hard to offer the opportunity to develop skills beyond hairdressing – leadership, management, client experience, business, marketing, technology…everything we need to give our clients the experience they want and to make the most of the strengths of our brand and business.”
Likewise, today, pet services are becoming major industry. Pets at Home now devote a significant part of their store footprint to vet and grooming related activities, and are a clear market leader here. Indeed, their two new retail ‘stores of the future’ in Stockport and Chesterfield are ground-breaking, and their offering has been transformed into an innovative ‘pet village’, featuring dog washing stations, selfie spots and pet care classes. Commenting on the company’s evolution, CEO Peter Pritchard observers that “the move from traditional to service-led retail is an ongoing strategic shift for Pets at Home. My priority at Pets at Home is to simply provide value to customers in a way no-one else can – we want to make our customer’s life’s easier, and to give them everything they need for their pet under one roof. What customers want is always evolving – for instance, we have just invested in a pet walking and boarding service. “Service” is just a buzzword – simply, all we are trying to do is meet customers and their pet’s needs”. Indeed, this customer centric approach has always been at the heart of Pets at Home: “Our founder, Anthony Preston, was a visionary. He wanted to make vet practices convenient – so he opened them 7 days a week, put in car parking, extending practice hours – everything the customer wanted. By putting the customer and their pet at the heart of decision making this has been hugely disruptive.”
Similar to Toni&Guy, critical to Pets at Home success becoming a service-led retailer has been the calibre of store colleagues they are able to recruit. Peter explains: “All our colleagues have a personal understanding of what it is like to be a pet owner – and know that owning a pet isn’t always a bed of roses. We tend to recruit really nice, kind people, who are good with customers, can communicate, and critically have a love of pets. Really great customer services starts with empathy. That’s why we employ people who love pets – the rest takes care of itself. I believe our people are our most valuable asset. People can lift your spirits, make you feel special – and this is so important in retail.”
The company currently operates 452 stores, and has increased its market share across all its categories for both online and offline platforms – including by developing subscription services: “Everyone [at Pets at Home] understands what it is like to be a pet owner. This is what helps us develop the right service”, says Peter.
From a talent perspective, this shift to service-led retail creates a unique set of challenges. Firstly, many retailer operators are very skilled at driving performance where customer experience and service often plays second fiddle to sales.
Traditionally, we have seen a brain-drain from retail to leisure and hospitality as these businesses seek to instil better retail disciplines in their organisations. Take Costa Coffee’s newly appointed UK MD, Neil Lake, who comes from an international grocery background – or Liberation Pub’s CEO, Jonathan Lawson who was previously the CEO of Vision Express. Could this shift to service-led retail be the start of a trend in the other direction? Will the skills learnt in the leading hotel schools, or honed in large hospitality companies such as IHG or Whitbread, soon be coming to our high streets?
Secondly, the colleagues providing the ‘services’ often need to be recruited, trained, led, motivated – and indeed, managed, in a very different way from traditional retailers. How will the retailers leading these service businesses adapt their leadership style and approach to properly leverage the talent that they have in their businesses? After all, in a service-led business, as Peter and Nigel observe, you are most certainly only as good as your people.