2025 - The Physical Store Evolution: Essential Insights for Retailers from Mintel's "UK State of Retail Report 2024"

The retail landscape is undergoing seismic shifts, with online shopping continually encroaching on the once-dominant position of physical stores. Yet, despite the challenges posed by digital retail, Mintel’s "UK State of Retail: In-store Shopping Market Report 2024" reveals that in-store shopping remains the cornerstone of UK retail.

Accounting for 71.8% of all retail sales in 2023, physical stores continue to play a critical role, although their share has declined from 78.2% in 2019.

As we have come to expect, Mintel's report provides invaluable insights into the state of in-store shopping and what retailers need to do to stay competitive as they start to trade in 2025. For readers interested in exploring the full report, you can access it here. The content and findings summarised below belong to Mintel, and any use of this material must respect their copyright and intellectual property rights.

At h3hex, we specialise in helping retailers navigate their dynamic and ever-changing trading environment. Through data-driven insights and strategic expertise, we empower our clients to succeed by reducing their exposure to risk and maximise the returns on their investments. Below, we’ll summarise the key themes from Mintel’s report and explore some of the strategic challenges retailers will face and how h3hex can help shape a response.

The Enduring Importance of Physical Retail into 2025

Despite the rise of online shopping, physical stores remain vital to the retail ecosystem. Mintel state that In-store sales are projected to reach £366.9 billion by 2029, with over two-thirds of retail sales still expected to occur in physical locations by the end of the decade.

While online shopping offers unparalleled convenience, physical stores serve as more than transactional spaces—they are social hubs and community anchors.

However, the sector faces significant hurdles. Consumers increasingly perceive online shopping as more convenient, citing issues like inadequate parking and lack of accessibility at physical retail sites. Notably, 71% of in-store shoppers say free parking would encourage more frequent visits, highlighting a straightforward opportunity for retailers and landlords to drive footfall.

For retailers, Mintel suggest that the challenge is clear: the in-store experience must evolve to meet modern consumer expectations. From improving availability and service standards to creating immersive and engaging environments, the focus must shift to re-establishing the unique value proposition of in-store shopping.

Opportunities for In-Store Retailing

Mintel’s report underscores the importance of experience in attracting customers back to physical stores. Retailers must ‘embrace the social shopping experience’ by turning stores into destinations that people want to spend time in.

Younger consumers, in particular, show a strong preference for in-store technology and personalised service. These features not only enhance convenience but also create memorable experiences that drive loyalty.

Additionally, service standards are critical. Younger shoppers, in particular, value knowledgeable staff and high-quality customer interactions. Investing in training and equipping staff with the tools to provide exceptional service can make a tangible difference to in-store satisfaction levels.

Finally, retailers need to address the issue of availability. Over a quarter of shoppers have avoided stores due to stock shortages, demonstrating that poor inventory management can have a lasting impact on consumer perceptions. Leveraging real-time data to ensure adequate stock levels is no longer optional; it’s essential.

Data is pivotal to guiding the critical strategies successful Retailers need to leverage here: 'Space utilisation' and 'localised value proposition'. Who is the customer, which products are they interested in, how can you rationalise the finite space on your trade floor and provide the experience target customers are looking for?

h3hex are experienced with helping retailers identify the customer profiles around their stores and how this varies from location to location. We can help you align your proposition to the actual customer passing by, maximising appeal and conversion.

Consumer Dynamics and Market Trends

Mintel’s research shows that local shopping destinations remain popular, with 47% of consumers visiting a retail location weekly.

Major shopping centres attract a younger, more affluent audience, while local high streets and retail parks appeal to older shoppers.

Tailoring the retail mix to these distinct demographics is crucial. For example, younger consumers prioritise food and drink options at shopping locations, while families focus on the retail mix itself.

Inflation and financial pressures continue to shape consumer behaviour, but there are positive signs. Easing inflation and real income growth have improved consumer confidence slightly. This creates an opportunity for retailers to invest in their physical formats and re-establish the high street as a vibrant and dynamic retail environment.

The Modern Retail Landscape

The rise of online retail presents challenges, but it also opens new opportunities. For many consumers, online shopping complements rather than replaces physical stores. Click-and-collect services and loyalty programmes are prime examples of how retailers can bridge the gap between digital and physical channels.

However, the scars left by the rapid shift to online shopping during the pandemic are still visible. Many high streets struggle with vacant units and declining footfall.

To revitalise these areas, collaboration between retailers, landlords, and local authorities is essential. They must work to curate tenant mixes that align with local consumer profiles, leveraging data to make informed decisions.

Clearly not all shopping destinations are equal. Some are winning, some are on a spiral of decline. As consumers vote with their feet and their wallet, h3hex can capture those insights. Mobility data reflects the actual audience engaging with a retail centre from as little as 4 days ago.

So, whether you are unsure as to which shopping destination is flourishing, or lacking an understanding of how the retail landscape is changing around your current stores, h3hex can provide you the confidence you deserve for your most important strategic decisions.

h3hex’s Perspective

At h3hex, we believe that the physical store will continue to play a pivotal role in our everyday lives. By leveraging data-driven strategies, only those successful retailers will be able to adapt to changing consumer needs and preferences, creating spaces that resonate with modern shoppers and win.

But we think the progression will be tough, and expensive, which will require optimisation strategies to ensure only the right store is in the right place. Once this has filtered through, we expect convenience centres to flourish, alongside managed shopping destinations. What happens to the middle is linked to a growing lack of identify and purpose in the face of convenience and choice, and we have yet to see a trend which will fuel its survival.

h3hex specialises in helping retailers navigate the complex retail landscape with data-driven insights and expert strategies. Whether you’re looking to optimise your current store network, expand into new markets, or align your offerings with evolving consumer needs, we’re here to help you thrive in an ever-changing retail world.