The Future of our High Street – A Retail Outlook
It has been a tough time for UK retail; business failures, store closures with the subsequent loss of jobs and peak trading periods (Christmas and Black Friday) reporting sales down on previous years, but not the worst on record. So, what will the industry look like in the short and medium term, is it all doom and gloom on the high street or is this an industry changing shape with new channels driving growth as the old channels decline and retail is transformed.
Retail, an industry under pressure
- Margins constricted by weakening demand and rising costs;
- Record levels of discounting;
- Store closures;
- Consumer confidence falling;
- Channel change.
The challenges facing the retail and leisure sectors on the high street are plain to see. The continued rate of store closures reflects the shift in public spending and the new reality that many of us prefer to shop online and eat, drink and entertain at home. The high street is adapting to an overcapacity in retail and leisure space resulting from these channel shifts. Those retailers embracing the shift from a store-based past to incorporating a digital future are reporting improving results but it appears that the slow to adopt are facing a more challenging future.
In addition to the closures in the retail and leisure sectors, many traditional store-based service businesses, such as banks, estate agents, recruitment agencies and travel agents, have continued to move online, albeit their rate of closure has slowed as fewer of these types of business remain on the high street.
The high street is in urgent need of new ways of thinking and new forms of retail. It remains to be seen if recent packages of support for the high street and reductions in business rates for smaller retailers will be sufficient to stimulate this.
To attract and retain customers many factors need to be taken into account, a number of which are born out by current trends that indicate retailers must acknowledge that consumers want to experience a seamless shop between the physical and the virtual, the bricks and mortar and the on-line. A strong on-line offer together with well presented, conveniently-located stores maximises revenue opportunities.
Also, there is growing movement towards ethical consumption, sustainability is very much to the fore, with increasing numbers of shoppers becoming more selective in what they buy, where they buy it, and looking at how retailers source product. Certain retailers have picked up on this and responded with their own initiatives to correspond with the consumers’ increasing focus on the ‘Environment 3 R’s – reduce, recycle and reuse’ , careful in what they buy, where they buy it and how they choose to spend.
Turmoil in the sector is unlikely to abate. Insolvency in retail, particularly those retailers unable to substantially reduce their cost base, is on the increase with more (often headline making) administration and CVA appointments being made.
Michelle Breslin, partner at TRI Group Bournemouth office, who specialise in helping financially distressed businesses, said: “The changing UK high street raises questions which need to be addressed by retailers and leisure operators about how to take their business forward and ensure they remain fit for purpose. Adjustment to business models and concepts to meet evolving consumer habits and trends, restructuring and new investment must be addressed and in the current climate, immediate answers are required”.
“The number of distressed businesses this year has led to an increase in company voluntary arrangements. We believe that CVAs can be helpful restructuring tools but alone are insufficient as research shows a significant percentage failed, leading to another insolvency process. The earlier that the problems are identified, the more options that are available and greater the prospects of securing the future of the business”. End