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Why E-commerce is moving to the high street

Amanda French, partner and head of retail team explores why online brands are increasingly wanting physical space and the key considerations for retailers looking to move to the high street.

For years, shopping habits have been constantly changing, with retailers finding that they need to have an online presence to survive and thrive. This trend was accelerated by the Covid-19 pandemic as online shopping boomed. Increasingly, however, we have seen brands that have never had a high street presence moving to open physical stores to build their brand and customer engagement, create a new unique consumer experience and take advantage of a resurgence in the high street and changes in technology – all ultimately leading to an increase in overall profitability.

The BIG MOVE to the high street

E-commerce is usually seen as a fierce competitor to high street businesses. However, we are seeing e-commerce businesses, such as Amazon and Gymshark moving from being exclusively online retailers to having a physical presence on the high street. In addition, we have even seen more traditional businesses, like Avon, move to the high street.

Gymshark opened its flagship store on Regent Street, London in October 2022 after 10 years of success as an online-only direct to consumer brand, while Amazon broke into the physical retail space in the UK in 2021 with its innovative use of technology and lack of a “check-out” or traditional point of sale.

More recently, we saw cosmetics brand Avon announce that they opened their first physical stores in the brand’s 137-year history in time for Christmas 2023.

Why are E-commerce businesses opening physical stores?

More than just a shop: shopping is a social activity, and businesses can use their physical store space to host events and bring together a community. Online sports nutrition brand Myprotein opened its first physical shop and cafe in Manchester in October 2023 and since then it has announced plans to host events, such as coffee mornings, to bring their costumers and affiliates together to create networking opportunities and build a community.

The physical experience: there is an appeal to seeing, experiencing and trying products before committing to a purchase that cannot be matched in online retail. Retailers may also find that customer service and human interaction can also make a big difference in securing a sale.

The brand experience: retailers who have spent years building their brand remotely are finding that physical stores enable them to reinforce their brand appeal and give customers the opportunity to engage with the brand in a way which is not possible online. Physical stores can also attract the attention of a new audience that may not otherwise come across the brand, and this can, in turn, direct more attention to the online store.

The legal implications for online brands considering moving to bricks and mortar

The move to the more traditional “bricks and mortar” from a pure online business can have several commercial, practical and even legal implications. We have set out below some of the legal implications a traditional online business will need to consider when making any move to the high street.

  • Commercial Property considerations: opening a physical store, or taking a concession within a department store, is likely to require retailers to enter into new legal arrangements which will need to be negotiated and agreed. Businesses moving to a physical store for the first time will need to carefully consider their liabilities for the length of the lease, rent-free periods and the extent and cost of any fit out needed at the store (particularly where the retailer only intends to open a physical “pop-up” store for a short period).
  • Intellectual Property (IP) considerations: this includes making sure trade mark registrations cover goods/services that are wide enough to cover offline (as well as online) products and services. For retailers which do not own the relevant trade mark themselves, there may be IP licensing considerations to consider too and ensuring that their license is wide enough to cover the sale through a shop (as opposed, to purely online). In addition, businesses may need to look at their software licensing arrangements and ensure that they have appropriate software arrangements for things like point of sale and accounting software products.
  • Marketing considerations: retailers may engage influencers to publicise their new physical stores. If the influencer receives any benefit from the retailer for doing this, or if the retailer exercises any control over the content that the influencer creates (which may include as little as simply requesting that the influencer creates content), the content may fall within the Advertising Standard’s Agency’s (“ASA”) CAP code and/or the Competition and Market Authority’s (“CMA”) scope. This means that any content posted by the influencer in connection with the brand engagement needs to be clearly labelled as advertising. Both the brand and the influencer are responsible for this, and both can be held accountable by the ASA and/or the CMA for failing to properly declare the content as advertising. The ASA has powers to “name and shame” brands and influencers who fail to comply with the CAP code, whilst the CMA may investigate whether the failure to properly declare content as advertising breaches consumer law. Retailers should also note that these enforcement powers are expected to be strengthened in the new year to include new GDPR style fines should the Digital Markets, Consumers and Competition bill become law.
  • Data protection considerations: there are privacy considerations given retailers will have CCTVs operating in stores. Retailers will be required to maintain efficient systems to ensure such footage of customers is kept secure and private, and this data is deleted when it is no longer necessary to retain. The retailer will also be required to complete a Data Protection Impact Assessment (DPIA), a process designed to identify and minimise the risks of processing personal data within their store.

Is your business considering a move from an online presence to bricks and mortar? Clarke Willmott has specialist lawyers who can assist you in retail, commercial property, intellectual property and commercial matters.

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Your key contact

Amanda French

Partner

Bristol
Amanda specialises in portfolio management and store development programmes for multi-national retail businesses. She is also experienced in managing investment portfolios.
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