Protecting value on the high street
The retail industry in the UK is changing, as is the face of the British high street. There is no doubt that traditional retailers are under pressure, largely because of the rise of online shopping, but also because of other challenges like declining footfall, increasing business rates and pressures on consumer incomes.
But there is much to suggest that it is not the death of the high street or the retail market that we are witnessing, but rather a change of focus and an evolution. There is plenty that can be done to protect value, both in terms of regenerating high streets and protecting retail brands online.
“With the rise of internet shopping, retailers need to find a way to become a destination for other reasons,” says Julien Allen, a commercial property partner at Trowers & Hamlins.
"This is where retail and leisure differ – leisure has an advantage because it cannot be done online. You can’t go out for a meal or a drink or get your nails done without visiting a physical space.”
He adds: “From a real estate perspective, the changing face of retail has resulted in a growth of logistics demand to cope with distribution, through things like warehousing.
And there has also been a growth in outof- town shopping destinations where the shopping experience goes hand in hand with the leisure experience, though investors are paying less attention to those opportunities today than they have in the recent past.”
For retailers, the challenge is to find ways to build their online shopping businesses that complement, rather than alienate, their store networks. Many are doing this. According to a report by Savills, the real estate agency, in 2018 as much as 30% of non-store sales actually went through a store, either because of the use of click and collect, or because things were brought online following a browse in store. This ‘shop window’ element is increasingly evident as aspirational brands like Apple and Nespresso open large physical stores even though they are well aware that many of their customers will buy online.
Savills points to two examples of retailers that are embracing the multi-channel approach. Next, the fashion retailer, has signed a partnership with online retailer Amazon that allows customers to collect parcels from its stores, while John Lewis fulfils half its online orders through collections in store. Savills data shows 39% of customers in the UK bought an additional item when they were collecting their click and collect order in 2018, and John Lewis reports 44% of its customers make an additional purchase worth an average of £18 when they click and collect.
“We have also seen an enormous growth in aspirational eating on the high street in the last decade. This became a bubble as too many casual dining restaurants didn’t get their offerings or price points quite right and have been squeezed by cannier competitors.” says Allen.
"The younger generation goes out for meals much more than the generation before, and so we have seen a lot of different types of restaurants opening up. That destination feeling is still very much there."
“That said, the high street looks very different now, with a combination of big conglomerate chains and small local boutiques.”
One of the biggest stories in retail over the past two years has been the increased use of the company voluntary arrangement (CVA) insolvency technique by high street brands and large multiple retailer chains. CVAs allow businesses in financial difficulty to renegotiate their debts with creditors and, in the case of retailers, have been used to press landlords for rent reductions by seeking their support in a turnaround.
“What we ought to be talking about is more flexible, short-term leases and pop-up shops,” says Allen. “I think we will see more of that coming in. We are also seeing developers putting retail into mixed-use schemes alongside residential, which creates a clientele and also diminishes the risk.”
Meanwhile, for retailers that are moving more and more of their sales online, there are further challenges associated with brand protection on the internet. Caroline Hayward is a partner specialising in all aspects of intellectual property law at Trowers & Hamlins, and she says:
"The main point really is that if you move a business online, you are obviously absolutely dependent on the IP rights relating to that platform.”
Many retailers will outsource responsibility for running their website to a third-party marketing agency, who will be in charge of maintaining the domain name and delivering the online strategy. Serious problems can arise if the relationship with that agency breaks down, and there have been cases of agencies holding retailers to ransom because it is the agency, rather than the retailer, that actually owns a valuable domain name.
“Those problems can be easily avoided if stores look at their contracts properly in the first place and properly register trade marks to cover everything they need,” says Hayward. “The contracts should state that the store will own all domain names, all IP rights relating to the website, and that they can clearly take over if the contract with the agency comes to an end.”
She says that such agency contracts are often signed off at a low level within the business and fail to get adequate attention at the outset: “You need to ensure you have all the IP rights you need if the day comes when you don’t want to use the agency anymore,” she adds.
There is another challenge that arises in relation to the use of other people’s trade marks as Google search terms. This was the subject of a long-running dispute between florist Interflora and retailer Marks & Spencer, because M&S advertises its flower delivery service via the internet and uses Google AdWords so that when an online shopper searches for ‘interflora’, an M&S advert for flower delivery pops up. Interflora sued on the basis that the advertising infringed its trade mark, but was unsuccessful. “The courts have developed various criteria about where the line is drawn in terms of using other people’s trade marks to increase your online presence,” says Hayward.
There are also trade mark issues that arise where companies with the same name, potentially doing very different things and on opposite sides of the world, run into each other online. And finally, the more business that a brand conducts online, the more vulnerable it becomes to attack from disgruntled customers seeking to malign its brand.
“All of these cases are highly fact dependent and generally come down to existing trade marks,” says Hayward. “They can present real commercial problems for online retailers, and by the time the problem has arisen, it is often too late.
"The key is to get proper advice on all contracts with people that run your online presence and do your advertising, and to register trade marks comprehensively and promptly.
“Getting a registered trade mark is much cheaper than sorting out issues once a problem has arisen.”
Retail is an industry undergoing transformational change on all fronts, where it pays to invest in registered brand protection, which can be then be deployed across all trade channels.