Whilst Peter Jones’ recent acquisition of photography firm Jessops was heralded by some as a victory for the traditional British high street retailer, new figures released today by the Centre for Retail Research (CRR) have served as a bit of a slap in the face, for want of a better expression. In its report, entitled Retail Futures 2018, the CRR estimates that the total number of retail stores in the UK will fall by 22% over the next five years, from 281,930 today to 200,000 in 2018. Broken down, 19.9% of this decline specifically represents high street stores, with neighbourhood shops actually expected to feel a more marked impact. These will decline by 34,587 (-26.2%) as a result of – according to the CRR – the declining profitability of neighbourhood shopping in many areas, the unwillingness of multiple retailers to continue operating in small neighbourhoods and the move towards perceived lower prices and better availability of stores in town centres, retail parks and internet shopping.
Indeed, all of this also comes following the launch of the government’s Portas Pilots scheme, spearheaded by the much-lauded ‘Queen of the High Street’ Mary Portas, and aimed at turning around the fortunes of some of the country’s hardest-hit town centres. In spite of the scheme, according to the CRR, around 41% of town centres stand to lose 27,638 stores between now and 2018, with job losses expected to hit a rather unsettling 316,000. Moreover, it is anticipated that 164 major or medium-sized enterprises will enter administration, involving the loss of 22,600 stores and 140,000 employees. The CRR suggests that many of these companies will survive but at the cost of closing more than half their outlets.
So, what are the key drivers behind what the CRR is describing as “the looming retail crisis”? Well, one only has to take a look at the stats for online spend and operating costs to get a pretty solid idea. In addition to customers simply shunning the high street – their share of consumer spending has fallen from 50% in 2000 to a predicted 40.2% next year – the share of online retail sales is expected to rise from 12.7% (2012) to 21.5% by 2018 or the end of the decade. This will amount to the highest online retail share in the world and, given the number of transactions now carried out online, the CRR reports that retailers with a strong web offering now need just 70 high street stores to create a national presence compared to 250 in the mid 2000’s. Finally, although consumer spending has increased by 12% since 2006, it has been outstripped by retail operating costs (including rates) which have risen by 20%. And herein, we can see the crux of the problem.
Further stats reveal that store vacancy rates across the UK have increased from 5.4% in December 2008 to 14.1% in March 2013 (according to the Local Data Company), a rise of 161%. The CRR believes that without intervention, the vacancy rate could rise yet further, perhaps above 20%. And on the online front, whilst 3.7% of food sales may currently be made on the web – compared to 19.2% of non-food sales – the CRR expects all four main grocers to develop their food online offers to such an extent that the share should could rise to 9.5% by 2018.
And what therefore is the CRR recommending as a means to revitalise our struggling high streets? Perhaps unsurprisingly, a rather sizeable injection of capital is top of the agenda. It believes that a £320m pump-priming fund will help turn failing and empty shops into good residential accommodation, create more service/entertainment/leisure outlets, and/or provide offices, doctor’s surgeries, classrooms/meeting rooms or other facilities for which there may be a local demand.
It appears then that we will have to get used to a very different-looking high street in the future. However, we are sure this is something our budding start-ups and aspiring entrepreneurs have clocked on to already, and we hope and anticipate that will play a positive part in its regeneration going forward.