David v Goliath
The two innovators giving small shops a chance to take on the big boys of digital retail
Britain’s high street has taken a battering over the past six months, with an estimated 1,334 shops closing, or earmarked for closure, since January, according to The Daily Telegraph’s store closure tracker. More than 23,400 jobs have been put at risk as retail giants including Mothercare, Marks & Spencer and House of Fraser have shut a number of their branches.
Analysts say that while higher wages, increasing costs and a decline in consumer confidence have hit retailers, the real pressure has come from the rise in business rates.
Steve Rowe, chief executive of M&S, revealed that the company decided to close its Covent Garden branch after it faced an “untenable” rate rise of almost £500,000 in a year.
Added to that the increasing competition from online rivals, which offer convenience and typically low prices, and it’s easy to see why traditional bricks and mortar stores are struggling.
Trouva, a five-year-old Londonbased company, is hoping to reverse the fortunes of the British high street with its online marketplace, which brings together more than 450 bricks and mortar boutiques from across the UK.
Claiming to be the antithesis of online giants such as Amazon and ebay, Trouva offers a platform for independent shops and boutiques to get in front of an online audience that they wouldn’t otherwise have access to. “This empowers them to outcompete the retail multiples and ecommerce giants who sell online from faceless warehouses,” the company said.
It has so far proved successful for the shops that have signed up, delivering around £100,000 in sales every year for the top bricks and mortar shops featured on the marketplace. The company’s own revenue growth has soared a whopping 3,332pc over the past two years, making it the second fastestgrowing tech business in the UK.
Trouva’s entrepreneurial co-founders, Mandeep Singh and Alex Loizou, combined backgrounds in traditional retail (Singh) and technology (Loizou) to start the business in 2013, first as Streethub, which focused on building up the technology used by the shops, before launching the consumer proposition in 2015 and renaming the company Trouva. After receiving around $14m (£10.7m) in seed funding from venture capital firms, including Index Ventures, the early-stage investment firm behind Facebook, Skype and Net-a-porter, and Octopus Investments, as well as independent investors, Trouva was able to, for the first time, make the products on its marketplace available for consumers to buy wherever they are based, using location technology and inventory data to show shoppers what is available in nearby boutiques. Chief executive Singh, 34, came up with the idea for Trouva after a career working as a retail consultant for large multinationals including Walmart and Arcadia, and seeing the way technology was revolutionising how people were shopping and how high street independents were failing to keep up due to their “awful understanding” of ecommerce.
“Friend of a friend” Loizou, 30, had the tech experience to get the business off the ground and was excited by the prospect of small businesses “not competing with each other, but with the big guys”. Many of the shops that apply to be listed on the site already have their own websites, but find it difficult to grow sales online or don’t have the capacity to keep it going.
“If a small business gets an online sale, they will often have to shut down the shop while they go to the Post Office to ship the item, therefore losing out on potential sales. They have to pay high shipping fees, as they can’t get volume discount, and this is alongside having to pay to have an inventory management system, customer service, marketing and SEO for their website,” Loizou says. Trouva takes care of the inventory management, marketing and customer service, enabling smaller businesses to focus on improving their physical stores and products. It takes a commission on each sale a shop makes, but there are no listing fees.
To maintain its position as a marketplace offering carefully curated products from design-led boutiques, Trouva is selective about the shops it accepts, and most are run by designers or ex-buyers, and, crucially, those that already have successful stores.
Singh admits his 50-strong team are “super picky” about the curators they have on the site and he says they decline the “majority” that apply. While they have around 450 store partners at the moment, they want 5,000 or more in future. The aim of the business is to expand into “creative capital cities” around the world, such as Berlin, where they launched last month as their first market outside of the UK.
Singh is passionate about helping small boutiques thrive, and believes Trouva is somewhat of an antidote to their squeezed profit margins, brought about in part by soaring business rates.
“Independents are incredibly vulnerable to business rates. Any small change can make them unprofitable. We are helping by opening these businesses up to audiences across the world”, he says.
He believes the business rates system is “antiquated”, and bemoaned the fact that bigger brands like Tesco “whine about business rates”, while
‘If a small business gets an online sale, some have to shut down the shop while they take it to the Post Office’
‘As ecommerce grows there’s going to be the decimation of big chains that won’t survive against Amazon’
independent stores are getting “lost in the message”. He said: “Large retail chains have the PR engines to kick up a fuss, but while independents have a stronger case, they are largely ignored by the Government.”
Despite business rates having an impact on profitability, Loizou is confident online and offline stores will “prevail”, as shown by the fact that successful online businesses are still opening bricks and mortar stores, such as Amazon, which opened its first supermarket in Seattle, this year.
Singh is more sceptical about the future of high street retail. “The revolution is yet to come,” he says. “Ecommerce only accounts for 15pc of UK retail sales, so what happens if this increases? There’s going to be the decimation of big chains that won’t survive against Amazon.
“There needs to be some acceptance of that. Bricks and mortar retail isn’t dead, but it’s going to change beyond recognition.”