The New High Street

The high street is dying. It deserves to die. We need to start working on the rebirth.

Piers

Aug 19, 2024

high street noun

(British English)

(North American English Main Street)

the main street of a town, where most shops, banks, etc. are

The high street is dying. It’s been dying for years, it’s as though there is a new insolvency announced every week, let alone the steady uptick in shuttered storefronts worldwide.

How Did We Get Here

Brick-and-mortar businesses became complacent. Innovation slowed, the customer experience declined, and new digital solutions popped up and stole the show.

Quick showcase of transitions:

Restaurants → Last mile delivery and meal kits
Cinemas and DVD Rental → Streaming
Shopping → E-commerce
Hotels → AirBnb

This transition 10x’d post COVID.

Where We’re Converging

Let’s use onshore manufacturing as an example: the industry dies out, the workforce retrains and the services decentralise - what was once made in the US is split across multiple third-world countries.

Applying this trend → the high street dissolves, high street goods and services decentralise exclusively across the internet.

Why This Will Suck

While the increased convenience is great, it will not last. And the sacrifices for this fleeting benefit are not worth it.

Consumer surplus will shrivel:

Like the high street got complacent, digital services will get complacent.
The experience will worsen, and the convenience that we got from these new entrants will disappear.

Prices will rise:

Unlike the high street which is ruthlessly competitive, most digital equivalents are highly concentrated - the largest restaurant chain in the UK has a 3% market share, whereas AirBnb has 30.6% of its market.
The brick and mortar bloc hold their digital monopoly counterparts in check - don’t like Ocado prices? Go to Sainsbury’s.
What happens when there’s just Ocado and Amazon?

Loneliness compounds:

We have a loneliness epidemic, the less we touch grass, the less vehicles we have to spend time together, the lonelier we get.

The Secret

True innovation has to maintain or improve every aspect of the original product. Physical experience is being traded for convenience. There is a crucial mispricing that we want to trade 80% of the physical experience for 20% more convenience.

This is not true - value is being lost.

Examples:

Seeing the latest blockbuster in IMAX surrounded by people instead of streaming on your home TV.
Browsing products, feeling them, making sure you get the best-looking orange or the nicest sounding headphones.
Getting pampered at a hotel, getting tips on the local area, and a concierge to help you with everything.
Waited on at a restaurant, walked through the history of the menu, and the chef, drinks brought to your table.

What To Do About It

We need to start building the new high street. The market has decided the current high street must die, interventionism is treating a symptom, not the cause. We need to stimulate and participate in the rebirth.

KAIKAKU is working on the restaurant chains of the future. We’d love some more competition. Furthermore, we need the cinema of the future, the hotel of the future, and more. Start building (literally).

The Opportunities

Brick-and-mortar is huge, like really huge:

Globally, Retail (- E-Commerce and Wholesaling) + Food Service + Hospitality + Leisure = $28tn. This isn’t even including the size of commercial real estate industry.

No one is innovating in this space:

Let’s use restaurants as a case study (because I work in restaurant tech):

McDonald’s Speedee System - 1958
Subway Assembly Line System - 1965
Starbucks Third Place Experience - 1987

Yep, that’s about it, no major innovation in 50 years. Same case across the high street.

Cracked people will always do cracked stuff:

Scrappy founders can go hard here.
Case study: when I launched London's first fully robotic restaurant.
- Acquisition, design, construction, and open all done at a fraction of the cost and in record time to what is considered conventional. 0 experience but insane hunger.
You can work the front line of your own business, speak directly to customers, and iterate at light speed.

Dragging it into the 21st century:

If you know a bit of programming and can integrate the right tools, you can bolt on numerous upgrades to a tangible business:
- Features that YC startups would have as their whole concept, such as computer vision for conversion/accuracy/compliance tracking.
- Or simpler things like order trackers and ordering apps that a SaaS company would charge thousands for.
Above is all stuff KAIKAKU has done in our restaurant in a few hours by some 10x engineers.

The game has changed since COVID:

The retail landscape has shifted dramatically post-pandemic, but many businesses are trapped in pre-COVID layouts and strategies, bound by long-term leases.
This is why there are still restaurants only just adding kiosks, shops only just adding self check-out.

What To Stop Complaining About

“The economics are bad”

Make them un-bad then, this is what innovation is all about. Most high street businesses operate on low single-digit margins, you can literally flip a whole sector on its head by hitting 10% EBITDA. The opportunities to supercharge a business with vertical integration are unreal when you have 4 walls to put your all into.

Blank Street Coffee has raised $100m+ doing this.

“We have to let go of nostalgia, Netflix/AirBnB/Doordash is the future”

This is not about nostalgia. This is about a loss of value. The market will always catch on if some value has been forgotten about.

When we went from horses to cars, there was no reversion as cars demonstrate The Secret - every major part of traveling by car is better than a horse. However, when we went from onshore manufacturing to offshore, not every part was better → now we have the dynamism movement.