Advertisement

31,000 more stores could close by 2022, warns report

Retail is in crisis and a further 31,000 stores are expected to close by 2022, with the loss of 382,500 jobs.

These are the predictions of the latest report from the Centre for Retail Research (CRR). Its report, Retail at Bay 2018, updates its 2013 survey that concluded that the UK retail business model was flawed and that online growth would see one-in-five retail stores close by 2018.

Indeed, it points out that the first few months of 2018 have seen 18 large stores and medium-sized retail companies go into administration, including Maplin, with Carphone Warehouse  only recently announcing significant store closures and job losses. It further highlighted that a total of 60,932 retail stores had closed since 2012 and expects 10,000 stores to close this year alone.

In the non-food sector, the report shows the number of retailers having dropped from 245,625 in 2012 to 198,327 – a fall of 47 per cent.

Delving more deeply into the report, figures show that between 2013 and 2018 electrical household appliance dealers did not fare as badly as some, with sales declining by 14.7 per cent; most other categories declined by more, such as hardware and DIY, which fell by 24.1 per cent. Store numbers in the category that included electricals declined by 17.6 per cent to 58,995 from 45,593.

Why? Well, the dramatic growth of online retailers is cited as one cause. In 2008, it points out, online sales were just 7.7 per cent of all retail. Now that figure has reached 17.8 per cent, worth some £66.7 billion. Sales volumes through traditional bricks-and-mortar retailers increased by only half-a-per-cent, compared with online growth of 87.7 per cent.

The report also points to a change in consumer purchasing behaviour away from retail purchase to a more entertainment-based model – eating out, events and destinations.

It says that the old business retail was based on regular sales increases, high rents and high profits, but that now the factors underpinning that model have all gone since the recession. It also concludes that the business rates system prevents bricks-and-mortar retailers competing successfully with online sellers. In 2018/19, CRR says that bricks-and-mortar retailers will pay £7.16bn in business rates to HMRC – 2.3 per cent of total sales.

The CRR report does not conclude that the high street will die but is adamant that it must change from being retail-led and focus more on leisure and entertainment.

So what can retailers do? The report discusses a range of strategies – and not all online-based. After all, it points out, Aldi and Lidl prosper without e-commerce. It advocates edited lifestyle concepts, carefully curated displays and leading-edge innovation. The main purpose should, it says, be to “get away from the banal me-too banal stuck-in-the-middle type of offer for the average shopper that is so prevalent in British retailing today”.

It does suggest, however, that retailers need to develop their online presence to become multichannel, operating as both online and store-based businesses, and learn how to differentiate themselves from pure-play sellers.

It concludes that every shop and every high street is in peril unless it takes action to stem the decline, rethink the retail model and urges Government to take steps to reduce the additional costs of high-street stores.

Commenting on the report, Adrian West, commercial sector director at Fujitsu UK, said: “This isn’t the survival of the fittest, this is the survival of the most digitally-savvy. Internet sales are expected to accelerate and consumers increasingly expect both their in-store and online experience to be boosted by technology. The consequence is bricks-and-mortar retailers have now involuntarily joined the race to reinvent their business or accept defeat.

“In our own research, we’ve found that eight-in-10 consumers would actually spend more with retailers that have a better technology offering. This represents a huge opportunity for retailers to tap into the two key drivers of 21st century retail spending – convenience and experience. Many consumers now prioritise flexibility over cost, especially as they’ve become accustomed to services, such as Amazon and Uber, that wrap around their needs. Moreover, almost half of consumers believe augmented reality will positively impact retail, illustrating an appetite for a different kind of shopping experience.

“Retailers must be visionary in their use of tech and give shoppers what they want, before when they want it. With consumer confidence plunging, competition is fierce and both customer loyalty and shopping experience are weighing in. Those standing still face a worrying prospect – being the next generation of retailers to be pushed out of the high street for good.”

Advertisement