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So what’s going wrong with retail?

May 1, 2018

 

I’m betting most people wouldn’t be too surprised to learn that the retail sector accounts for a third of all UK consumer spending.

 

What might come as shock however is that top business analysts now say it’s a sector in “broad decline”.

 

Earlier this year, Toys R Us and electronics chain Maplin went into administration. Last week, the Carpetright chain announced about 80 store closures.

 

All of them cite rising overheads and a weaker pound as reasons - but when an established discount operation like Poundworld says “falling consumer confidence” is behind poor performance then you know you’ve got trouble.

 

As it happens, Poundworld is owned by private equity firm TPG Capital, which also controls the troubled restaurant chain Prezzo who are closing 94 branches.

 

There’s a growing opinion among industry watchers that boardroom indifference means many retail failures are actually self-inflicted, as happened with ill-fated BHS. City-orientated owners with short-term interests would rather opt to divest holdings than consider ways to meet changing consumer needs, say study findings.

 

Clearly, the heady days of large-scale acquisition buoyed by a ‘big-is-better’ philosophy and easy borrowing are long gone. Nowadays you are more likely to have asset managers advising clients how to spot the warning signs of a retailer in trouble

 

The impact of all this isn’t immediately noticeable to us as punters. About 75% of the goods we buy are imported. So the first we hear about ‘decline’ is when the associated job losses start mounting up; and by then it’s too late.

 

It’s not just the big names that stand to be affected either as demand among retailers falters. An imploding supply chain hits everyone, large and small.

 

So is this a case of an over-heated market seeking out a new level? Or are there other factors at work?

 

Well, the Confederation of British Industry (CBI) is adamant that a squeeze on consumer incomes lies behind a fifth successive month of disappointing sales. What’s more, the employers’ organisation expects any future rises in living standards to be modest.

 

Tough times call for tough measures. Supermarket giants ASDA and Sainsburys yesterday confirmed that they are talking seriously about a merger. Tesco has already got itself a stake in the wholesale end of things. Meanwhile rumour has it that B&Q is considering swapping a few of its retail park megastores for High Street locations.

 

 

Is there a local solution?

 

I hear a lot about the need for city centres to re-invent themselves. The trouble is that its not at all clear how this can happen or where the resources would come from. You get a similar lack of definition as to what new competitive approach would involve.

 

Our shopping habits have changed drastically in less than a decade.  E-commerce accounts for a 28 percent share of total business turnover in the United Kingdom. Roughly 80 percent of UK internet users shop online - the highest rate in Europe.

 

The people behind Swansea’s Business Improvement District (BID) recognise that online retail is here to stay. Their answer is to enhance local shopping with a ‘click and collect’ car parking service.

 

Changing the focus of the overall shopping experience to include food and leisure is also something that gets mentioned; although I’m personally not a fan of those kerbside cafes crammed with smokers.

 

Last week, I listened to a stallholder in a covered market complaining that car parking was difficult to access, overly expensive and in entirely the wrong location. The place in question was Doncaster but the refrain is a similar one across most towns and cities.

 

Developing a thriving night-time economy sounds like a good idea, provided you weigh things against the social impact. Get it wrong and its awful. Another balancing act is extending pedestrianisation in retail areas without killing off traditional passing trade. And then, of course, there’s the matter of business rates to consider.

 

Managing to stay afloat is a big ask given the tsunami of big-name closures that looks set to continue for a while to come.

 

Local solutions undoubtedly have a place but I’ve a feeling this particular downturn is going to need a credible fix from the people who run the economy – not just those who support it.

 

 

 

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