26/08/2016

The end of the high street?



British Home Stores closes for good this week leaving another gap in the increasingly slim choice of large UK stores. Not a shop I personally used but one which employed thousands of people and whose large city centre footprint will be difficult to fill. I suppose some of the space will soon be occupied by Costa Nero Republic or student flats but it is another example of a big name being downed by the triple whammy of high rates, Primark and online shopping. BHS was of course a struggling company but more intriguing- and perhaps more prescient- is the decision by Burtons and Dorothy Perkins to abandon many of their larger stores for a mainly online presence. Is this a glimpse of our retail future and if so, what will they do with all those empty shop units? Not that cities are stopping building them. No development is complete these days without a row of shop units in it even though the range of shops is falling year on year. How many coffee shops is too many? 

My city’s Burtons is following the route of those in a number of other cities by closing its doors soon and disappearing from the city centre. This has been something of a stealth development using a method which- deliberately or not- has allowed it to slip under the media radar. What happens is that the managers tell the staff quite early and this soon leaks to the customers but officially nothing is confirmed. When the shop finally closes, the people directly affected (staff, customers) have already had weeks to absorb the news which thus makes a very small splash when officially revealed. It’s not clear whether this is the future for all branches and oddly there will be a Burton’s presence in Liverpool in a shop called Outfit, already open. Outfit gathers together several brand names under one roof though inevitably the range on display is much smaller than that you’d find in their own shops. As well as Burtons and Dorothy Perkins it also includes Top Shop and Top Man. 
Is this the model for the whole group’s physical retail future? If it is then eventually they will replace four separate shops with one medium sized one that acts more like a showroom. There is much much more, of course, “on our website”. Imagine this rolled out across other retail groups and you would end up with about 25- 30% of the current volume of shop units needed yet in most places not even all of the current ones are full. Assuming coffee shops and Tesco can’t inhabit them all (they’re hardly going to open adjacent stores) that leaves more than half of the current units empty in the future. Should another large national department chain fall- and there are only three left now- that means more empty space. There is no hint that either John Lewis, Marks & Spencer or Debenhams might be in trouble but you never know especially if we do fall into that oft predicted post Brexit recession. Then you’ve got the big clothing chains that also occupy prime units- your Next, New Look etc – and take one or two of them away and the offering is looking threadbare.
While nobody can stop people shopping at Primark or online one vexing issue which can be solved is the burden of high rates. These are actually the tipping point- in the case of BHS and Zavvi in particular- that turned a crisis into a disaster. It looks like many stores- even well known ones- are a couple of weeks away from collapse if revenue drops and landlords show no mercy. It’s a system that needs more regulation which would surely be in everyone’s interests in the long term? Better for the landlord to have a reduced rent than none at all.
In this context the continued building of new shop units remains baffling and you wonder what will they put in them instead of retail units; you would hope that this is something government is thinking about before it’s too late.

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