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Tuesday 15 October 2019

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2018 UK store closures ‘worst for a decade’

Written by Chris Lemmon
31/05/2018

This year is expected to be the worst year for retail store closures since 2008, with more than 10,000 stores leaving retail use, according to the Centre for Retail Research (CRR).

The report argued that the UK retail business model was flawed and the growth in online sales would result in the closure of 20 per cent of all UK retail stores by the end of 2018. Since 2012, the report estimated that over 60,000 stores have closed (a fall of 15.7 per cent), with the figure expected to rise to over 70,000 by the end of 2018 (-18.4 per cent).

In 2008, the online share of the retail market was just 7.7 per cent, but has more than doubled to 17.8 per cent this year – worth around £66.7 billion. The study found that sales increases made by traditional retailers were around 0.5 per cent since 2012, while online retailers have enjoyed 87.7 per cent growth over the same period.

CRR attributed the continuing downfall of the High Street to a number of factors: a decade of weak growth; changing consumer behaviour towards experiences, eating out, events and destinations; lower (often negative) profits because of poor sales combined with cost hikes from the National Living Wage and Apprenticeship Levy; the depreciation of the pound; and long-term uneconomic rents and business rates.

The report noted that business rates continue to play a role in hindering bricks and mortar retailers from competing successfully with online sellers. It found that in 2018-19, a bricks and mortar retailer will pay over £7 billion in business rates to HMRC – equating to 2.3 per cent of their total sales. The online sector will pay £457 million – equating to just 0.6 per cent of online sales.

High Streets will soon have a new look, according to the study, with a greater focus on leisure and entertainment. More space will be allocated to restaurants, coffee shops, artisanal food, health and beauty, dance, wellness and fitness needs. About 41 per cent of High Street commercial districts will need to get smaller, because they are already declining and there are insufficient leisure/services to replace all the retail provision that will be lost.

Research author Joshua Bamfield said: “High Streets are an essential part of our town centres, creating employment and providing vitality. Hundreds of billions are invested in retail businesses and its related property assets. Yet a large part of this industry is in the process of closing down, potentially putting hundreds of thousands of people out of work and imperilling in the process our High Streets and shopping malls.

“Most large retailers that own shops need to develop their online presence to become multi-channel, operating as both an online and a store-based retailer with probably at least one-third of their business being online.

“They will probably need fewer stores, they still need to open new but smaller stores and close older stores, they may need to bring in other retailers to their shops as concessions, and develop a much more focused approach to their stores. They also need by trial and error to discover how to differentiate themselves from pure play online sellers and ensure that their physical presence on high streets and retail parks adds value to the business,” he concluded.

Commenting on the report’s findings, Adrian West, director of commercial at Fujitsu UK, added: “This is not 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.”


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