The future looks increasingly bleak for UK high street retailers. The aptly-named “retail apocalypse” seems to be in full force, with a wave of well-known stores, both large and small, closing down by the second.
But what does this mean for the modern shopper? And more significantly, what does it mean for today’s store owners and the way they manage their businesses? Let’s delve deeper into the collapse of the high street, the causes that have contributed to this and the way e-commerce has revolutionised the shopping experience.
The High Street Crash of 2019?
According to the UK Centre for Retail Research, a total of 5,800 stores shut down in 2017, with this year being “the worst for a decade” as another 10,000 are predicted to close by the end of 2018.
The epidemic swept through household names including Toys ‘R’ Us (which closed all of its stores to fall into administration and caused 3,000 job losses), Debenhams (which was recently forced to close a third of its stores), New Look and Mothercare which are both planning store closures.
As we move into 2019, things only seem to be getting worse, with a department store demise infecting chains such as House of Fraser, which is set to close 31 of its 59 stores, including its flagship store in Oxford Street. Marks & Spencer (M&S) has also fallen victim to the epidemic after an announcement earlier this year of 100 planned store closures by 2020, with 35 already scheduled for next year.
It’s not just retailers being axed by the apocalypse; four restaurants are disappearing daily from the high street. Well-known brands such as Byron, Prezzo, Strada and Jamie’s Italian are now closing some of their restaurants to cut costs amid the ‘Netflix generation’s’ shift in eating habits. Food apps such as Uber Eats are opening up the online delivery market by bringing local restaurant food to customers’ doors ‘with a tap’.
Business Rates, Budgets, Bad Management and Brexit
The fall of UK retail seems to have been caused by a combination of four factors – business rates, budgets, bad management and the infamous Brexit.
Higher business rates (a tax on property used for business purposes) have proved a colossal burden for high street retailers since the 3% increase earlier this year in line with rising inflation, while their online rivals pay a significantly lower amount; with some traders evading business rates entirely. However, as part of this year’s Budget, Chancellor Philip Hammond announced a £400m ‘digital services tax’ for online retailers on their profits made through advertising and streaming, though this will not come into power until 2020.
Despite this attempt at restraining the ever-growing e-commerce market, business rates for 2018/19 dropped for some online traders such as Asos, whose rates have fallen by 0.8%, while Amazon is paying a mere 0.7% more, compared to an increase of 3% for traditional retailers. Stores claim that an urgent reform is needed to save the future of the high street and level the playing field between bricks-and-mortar and online businesses.
Higher wage bills have played a part in pulling down the high street as a result of the rise in minimum wages. In spite of more money going to staff, customers have been tightening their belts due to last year’s average pay packet (2-2.5%) not keeping up with inflation rates (3%). Lack of business investment due to Brexit uncertainty and a change in pace of working life, such as self-employment, zero-hour contracts and part-time jobs, have also kept wage rises at a low due to fewer hours being worked.
Analysts have argued that bad management is also to blame, with “inexperienced” retail bosses and CEOs not becoming adaptable enough to the changing consumer landscape, or making “terrible decisions” which lead to huge business losses such as Mothercare, Carpetright and New Look stooping to a form of financial ruin, known as company voluntary arrangements (CVA), in order to dispose of their weakest stores.
It’s hardly surprising that Brexit is guilty of contributing to the retail epidemic, with the pound losing nearly 15% of its value since the referendum on 23 June 2016. As a result, import costs have increased, which in turn have raised product prices.
The Evolution of E-Commerce
E-commerce has no doubt re-defined the traditional concept of retail, easily slotting into today’s ‘I want it now’ generation, with its promises of ‘same-day delivery’ challenging the standard offer of three to five working days.
Meanwhile, continuing the destruction of the high street are online giants eBay and Amazon, wiping out booksellers and clothes shops click by click. Netflix has usurped the DVD age, while iTunes and Spotify are causing CDs and iPods to become impractical. Social media also bombards us with retail adverts, thereby streamlining the consumer journey.
The UK is the world’s third largest market for e-commerce, and thanks to our millennial generation who use the Internet for almost everything, there’s no shortage of consumers.
The recent extreme weather has certainly played a significant part in the increase of online sales, with customers preferring to stay within the comfort and convenience of their homes rather than trek to crowded shopping malls or high streets in arctic or tropical conditions. And if they do decide to take a trip to their nearest store, today’s shoppers are also requesting a ‘pay in store’ app to skip queues.
Retail giants should prepare and plan accordingly by establishing or focusing on their online presence, offering ‘click and collect’ services to reel in a wider consumer audience or ‘in-store experiences’ that can’t be found online. Traditional stores need to embrace this period of change in order to re-define the shopping experience.
Pioneer Like Primark?
There’s one retail brand that seems to be doing something right both online and offline. With offices now located around the globe and a strong online presence, Primark seems to have stayed afloat while competitors sink.
Primark’s website is an example of effectively merging bricks-and-mortar and e-commerce. Their online shop offers customers a taste of their product range, without giving them the option to actually checkout. Visitors can ‘favourite’ items or create an outfit from individual pieces, but, interestingly, are unable to buy anything. This innovative method of ‘taste but don’t eat’ appears to successfully reel shoppers in hook, line and sinker, with the in-store population still going strong.
Perhaps the key to reforming the modern retail experience and combining both online and offline trade is to follow in Primark’s low-value prices and give consumers ‘just a glimpse’ before inviting them to experience the real thing, appealing to the ‘I have to have it now’ consumer mindset. E-commerce has become so entwined with high street stores that it is now an extension of traditional shopping rather than an alternative, with customers constantly comparing high street prices with online ones, wondering where the cheapest version is located and how quickly they can get it. To transform tradition, it seems the retailers of today must invest in innovation, appealing to a generation who increasingly have everything available at a click or a swipe.
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