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High street shake-up: Challenges facing the retail sector

High street shake-up: Challenges facing the retail sector

As big name retailers’ physical stores continue to face challenges, Move Commercial explores the difficulties brands are working to overcome, the impact they’re having on the North West and what lies ahead.

Words by Natasha Young

 

It’s been a turbulent start to 2018 for the UK’s high streets, with big name brands marred by financial difficulties, cutbacks and administrators being called in.

For some, the weeks and months building up to Christmas 2017 set the tone for a testing start to the year as declining sales over the peak shopping period were reported. But it wasn’t simply a case of shoppers tightening the purse strings altogether, as online stores including ASOS and boohoo.com were celebrating successful trading and record revenues.

So where have the problems been lying for physical high street shops?

The difficulties faced by several fashion giants and department stores have been hitting headlines during the opening months of this year.

House of Fraser was said to be embarking on a “year of transformation” in 2018 amid reports of a decline in sales in store and online during the run-up to the festive season, while Debenhams was reportedly cutting 320 management jobs by March.

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The clothing chain New Look also recently announced proposals to slash rental costs and its UK store estate during what it described as “challenged trading performance and a difficult retail environment,” and earmarked 60 of its 593 stores for potential closure, in turn affecting a maximum of 980 staff.

Here in the North West, New Look’s men’s branch in Wigan and a store in Stockport’s Merseyway shopping centre were among those put forward as part of a Company Voluntary Arrangement (CVA) – a formal agreement with a company’s creditors which allows a proportion of debts to be paid back over time.

Daniel Butters and Neville Kahn of business advisory firm Deloitte LLP were appointed as nominees to the CVA, with New Look seeking creditor approval to progress it by a deadline of 21 March.

On announcing the proposed strategy to cut costs, New Look’s executive chairman Alistair McGeorge highlighted the chain’s “over-rented UK store estate,” with Butters adding: “The retail trading environment in the UK remains extremely challenging, driven by weaker consumer confidence, the implications of Brexit and competition from online channels.”

“While closures are not desired, it can open up opportunities for new players to enter big cities and towns.”

According to John Barker, partner at North West commercial agent Hitchcock Wright & Partners, oversized costs brought about by property portfolios are not uncommon amongst prominent retailers at the moment, and the impacts that rectifying the situation through closures can have on the high street can be more optimistic for some locations than others.

“Many of the high street brands who are experiencing troubles over-expanded during the stronger economy, leaving them now burdened with debt and underperforming outlets,” explains Barker. “While closures are not desired, it can open up opportunities for new players to enter big cities and towns. The former BHS unit in Liverpool, for example, is reportedly being recycled in to a new retail offer.

“Smaller high streets in the North West will be affected most by such closures, as the loss of a big retailer could lead to a domino effect of smaller retail stores following suit.”

Stockport and its Merseyway complex have also been hit by the confirmation that M&S will push ahead with the closure of its store in the town.

The branch and an outlet shop in Greater Manchester’s Denton were subject to consultation over their possible closure along with six others around the country, whilst it was also confirmed that a further six shops including a Birkenhead branch would shut by the end of April.

Despite efforts by Stockport Council to persuade M&S to stay open, the local authority announced at the end of February that it was “disappointed” the closure will be going ahead.

However with an ongoing £1 billion transformation of the town, which has included the recent opening of Redrock Stockport as well as plans to rejuvenate Merseyway into a “popular, modern and inviting shopping centre,” the council has pledged to ensure the town centre “meets the future changing trends and patterns of not only retailing but other uses too”.

According to M&S, the moves are part of its wider transformation plan to better meet the changing needs of customers with closures, downsizes, relocations and conversion to food-only stores.

Sacha Berendji, director of retail at M&S, described the decisions being made as “tough but necessary” and “vital for the future of M&S”.

Consumers’ changing approach to shopping has and continues to be an issue for many big retail names, and it goes beyond fashion brands and department stores with the likes of Toys R Us and technology chain Maplin collapsing into administration in recent months.

“Retailing is about digital and face-to-face interactions with customers and how the different channels complement each other.”

Some retailers are managing to keep up with the transition of shoppers turning their attentions to the internet or looking for other attractions on the high street, however others are still facing problems.

“Shopping habits have changed profoundly during [the past decade],” says Barker. “While consumers may be spending less money in shops, internet sales have been steadily growing – something which the likes of Next and John Lewis have been able to capitalise on.

“But attitudes are also changing and consumers are demanding more experience-led leisure activities which has paved the way for food and drink experiences and restaurants popping up on our city centre high streets.

“For our high streets to flourish, innovation and collaboration needs to be the focus.

“Physical stores have an opportunity to become attractions as the trend grows to not only shop, but eat and drink too. Popular bakery and café Patisserie Valerie has recently opened at Debenhams’ store front in Liverpool ONE, for example. This may prove the best chance of success to lure customers in with the promise of a spectacle or entertainment.”

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Looking ahead, the British Retail Consortium’s (BRC) chief executive, Helen Dickinson predicts the sector will continue to face pressures to “consolidate store portfolios and retail workforces through 2018 as structural and technological change gains momentum”.

She tells Move Commercial there are a number of steps which are necessary to help protect and support the industry and the communities it serves.

“The BRC and our members remain committed to work in partnership with government to, firstly, up-skill the retail workforce with the digital skills and confidence to work effectively with new technologies entering the workplace,” says Dickinson. “Enhancing the momentum towards a vision of better jobs in retail is not a ‘nice to have’, it’s a necessity.

“Secondly, retailing is about digital and face-to-face interactions with customers and how the different channels complement each other. Having a business tax system that works to support that, not undermine it, is what the country needs and what we remain committed to work in partnership with government to deliver.”