Death of the Iconic High Street Brand?

Iconic baby goods retailer Mothercare has entered into administration, putting 2,500 UK jobs at risk. Administrators from PWC announced that there will be a gradual closure of all 70 Mothercare stores in the UK. Once the first stop for expectant mothers, a series of historic difficulties have seen the chain shrink from nearly 400 stores in 2009 to 79 today.

Retail remains the largest single private sector employer in the UK, with one in 10 people working in retail, and annual sales totalling an astounding £358bn. Yet the British Retail Consortium has warned that over 30 per cent of Britain’s retail jobs could vanish by 2025.

It seems barely a month goes by without a high street retailer encountering serious difficulties.

Brand names such as Links of London, Jack Willis and Debenhams may live on (in some form at least) to fight another day, but buyers of such businesses will always link survival to the closure of unprofitable stores and a reduction in staff numbers.

Mothercare serves as a further reminder of the troubles on the high street. The question is regularly asked: Are we seeing the slow, painful death of the high street or is there any room for optimism?

Several commentators have been quick to identify a terminal crisis in the sector. Loss of sales to online stores, lower margins and high rents have placed a strain on even the most efficient of retailers. There has been a clear reduction in high street footfall, resulting in a drop in consumer spending since 2015.

Coresight Research said in February 2019 that Amazon reported a 23.3 per cent growth in UK revenues to $14.5 billion in 2018. Many advocates of the high street point to a zero sum game, in which Amazon’s success comes at a direct cost to the high street. GlobalData reports that Amazon is now Britain’s fifth-biggest retailer, accounting for £4 in every £100 spent in retail in the UK.

From 1 April 2019, the National Living Wage (NLW) increased hourly rates to at least £8.21 for workers aged 25+, a substantial sum for retailers for whom wages make up 46% of operating costs.

Brexit has also put retailers under pressure, with the weak pound causing a rise in import costs.

High street retailers are united in their belief that business rates put them at a disadvantage to their online counterparts. Many have even argued for some kind of comparative tax to be placed on online competitors, in an effort to level the playing field.

However, pessimism is not shared by all experts. Many argue that customers will always want the experience of going into a store, handling and trying on items and being able to converse face-to-face with staff.

This is a view promoted by Alan Hawkins, CEO of the British Independent Retailers Association (BIRA), who appears confident that the high street should not throw in the towel any time soon.

He’s said:  “The consumer is king and if they want to buy online, then that is their call. But from our observations consumers still want the experience and level of service found when shopping in a bricks-and-mortar store“

Other commentators have been quick to point out that bad management, lack of investment and a failure to understand and adapt to the changing market place were significant factors in distinguishing between recent high street failures and surviving competitors.

Many retailers have begun the fightback, combining online and offline shopping. The adoption of new technology could well be a key factor dictating whether retail chains survive.

Nick Harrison, of analyst Oliver Wyman, believes that “Retail does have a bright future, but the successful retailers of the future will be very different to today.”

Several retailers are already experimenting with technology in an effort to bring buyers back into stores, from augmented reality “smart mirrors” that let customers change the colour of their clothes virtually, to staff using digital assistants to sort out customer needs However, recent findings from Microsoft show that UK retailers are falling behind in integrating Artificial Intelligence (AI) into their business. Historically, UK retail stores have been reticent to use new technology. Expect to see increasing use of AI, as a reversal of this trend may be crucial in the fightback.

If the physical store is a dying breed, then no-one has told the developers of the futuristic 106-acre Axiom shopping centre in Yorkshire, which is scheduled to open in autumn 2021.

Twelve major brands have committed to the shopping centre, with over half of the floor space is now taken. Five top chains are set to move into Plymouth’s new £53m multiplex whilst work on a £40m retail park set to transform shopping in Bicester has also begun.

Only time will tell whether the high street can be saved. Will Amazon’s rapid growth be slowed? Will the next government step in and reduce the tax burdens faced by retailers? Will a resolution of the Brexit stalemate and an improvement in the pound’s value on the global currency markets ease the pressure on retail?  Perhaps most significantly, will the high street adapt to changing times?

Samantha Dover, a senior retail analyst at Mintel, strikes a positive tone when answering this question.

“The high street isn’t dead… Retailers will have to change though….I think you’re going to see retail as tastemakers. More local, more targeted and recommendation based.”

It is easy to get wrapped up in the rampant negativity surrounding the High Street. However, the various building projects taking place across the UK demonstrate opportunities for growth.

Bold and visionary leadership is needed from High Street CEOs who will need to take the fight to the online competition. If retailers fully embrace new technology, we could see the shopping experience transformed for the consumer.  This will require an in-depth knowledge of the changing habits of the modern shopper.

The in-person, in store experience will, in whatever form it takes, always have a place in the market. How big that place is remains to be seen.

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