Russell Adams – Director, AdMore Recruitment
Over the last few weeks much has been written and discussed about the future of Britain’s High Streets and retail generally. It has dominated the news channels, the papers and even Question Time. Clearly the sad plight of Comet, Jessops and HMV has crystalized in many people’s mind the changing retail landscape and the headwinds many retailers face. Such a period of publicity and scrutiny form the wider public has not been this intense since the demise of Woolworths. Many opinions and predictions have been voiced over the last couple of weeks but in contrast to some reports this is a highly complex issue, driven and influenced by a multitude of factors with no easy answers for retailers, the government or indeed landlords.
Many people point simply to the growth of online retailing over the last decade and the changing patterns of consumers as the major cause and decline of the high street. Without a doubt this has been a significant factor and pure online businesses with a lower cost base have been able to undercut the traditional Bricks and Mortar retailers. However, this issue has not happened overnight and businesses like Amazon haven’t suddenly appeared. I do think that this argument at times is still overstated. Firstly, according to some reports, approximately 90% of products are still purchased in a physical retail environment, with, according to the British Retail Consortium 43% being spent on the high street. No one questions that this figure will decrease over time but it still doesn’t justify the statement that the High Street is dead. Secondly, everyone acknowledges that much of the future is in multi-channel or Omni-channel and where businesses have got it right, such as John Lewis, it has delivered fantastic results. Further innovations such as Click and Collect are needed to respond to the change in customers’ behaviours. Looking back over the last few weeks a number of businesses have shown the benefit of this multi-channel approach with much improved results from the likes of Argos.
Another suggested factor affecting the failing High Street is the poor management of a number of retail businesses. With the businesses that have entered administration, many fingers have been pointed but I personally would like to defend these executives. These were often well run businesses with Boards made up of experienced and successful retailers, who in many circumstances have joined the business to try and support its turnaround. I do wonder if it was more to do with whether shareholders were prepared to forego short term gains to ensure long term success. As has been seen, being a quoted company can be challenging when a major change in strategic direction is required.
There are also certainly challenging times ahead for landlords. Indeed one in ten shops on the High Street currently lay empty with demand focused on the large and successful shopping centres. While this shift is not new, as multiple retailers look to reduce their store footprints this will only lead to less demand on the high street and a greater need to be innovative with property uses. Many have called for tighter planning regulations to prevent more large shopping malls being built but this really isn’t a long term strategy. Fundamentally customers want to shop in a convenient and enjoyable way and we must give people a reason to visit the High Street, whether that be better parking or a better range of local products etc. In the short term there is little hope that the leisure and restaurant sectors will snap up some of these units as they themselves struggle against the economic headwinds causing more people to stay at home. Much debate has been made around what should be done however we are seeing some form of renaissance for the independent retailers. It is difficult to argue that there is just overcapacity on some High Streets and thought must be given as to how property is reclassified and used. Going forward it is unlikely that retail demand will match the supply and it may be that residential use and the reshaping of the high street is inevitable.
Clearly the economic slump has been a major factor affecting the high street. After 5 years of negative or little growth, GDP is still 3% below pre-recession levels. I do believe though that in some cases it has just sped up the demise of businesses who faced structural changes to their market. HMV, Jessops and indeed Woolworths are all businesses described as “walking dead” or “Zombie”. Many of the businesses may have survived a little longer in more buoyant times but would still have inevitably faced a bleak future because of the changes to the marketplace and sectors in which they operated. Retail history is littered with consolidation and administrations as the sector rapidly evolves and develops. As always there are winners and losers and the ability to anticipate and adapt to the changing needs is essential in delivering long term success.
Many people have looked towards the government to take more decisive action, whether that be to cut rates or to support Portas or other initiatives, however no action will ultimately change the underlying trends and headwinds for the sector. There are no easy solutions. Portas and other initiatives are important but change needs to happen and it will be painful.
The last few years have been extremely challenging for the High Street and as times became tougher, costs have been cut which has reduced the level of service and the attractiveness of the environment giving consumers less reason to visit physical locations. Although not the only solution, service, product knowledge and in-store theatre will provide a greater incentive for people to shop both physical stores and the High Street in general. Businesses need to invest where possible to create and deliver this environment. I wish I had another example but I am afraid like many others I cannot help but admire Apple. Unlike most other businesses they have been investing in their store portfolio and can boast some very impressive sales per square foot. I do appreciate part of their success is the desirability of their products but to be fair they can easily be purchased on-line like so many other products. The reason for their success from a store perspective is they have successfully created a retail environment that enhances the purchase experience but perhaps critically, the customer service and product knowledge offers real value to the customer and gives a genuine reason to visit the store.
There are certainly many challenges ahead but I am not sure it is as apocalyptic as some suggest – there is a future and it is about adapting to that future to meet the needs of changing consumer behavior. Many retailers need to adjust their store portfolios and this will cause short term pain. High Streets are and will continue to be an important part of the retail mix but in a different format to what we see today. People still love to shop, people love to see and feel product in certain categories but they need to be able to shop in a convenient, enjoyable and engaging way.