Incoming emails this week as we drift back to work provide a clear reminder that the high street has moved firmly online. The huge volume of messages from what are now web-first retailers seem to eclipse anything relating to work, promising big reductions, free returns and yet more incentives if we buy right away.
Napoleon would struggle to call England a nation of shopkeepers these days, if the present woe in the retail sector is an indication of things to come. While sales in November edged up by 1.3%, beating forecasts, and anecdotal evidence of shopping in the days immediately following Christmas has been positive, the outlook remains bleak. Weak consumer demand is combining with a range of increased costs, including a higher minimum wage. Cash strapped shoppers, squeezed in particular by hikes in mortgage and rental costs, are expected to keep their wallets shut until the spring; at the same time, many retailers face a 6.7% business rate increase.
The final tally for UK store closures in 2023 is believed to have topped the 17,000 seen in 2022, a five-year high beating even the peak of the Covid period. High street giants reporting net closures of units include Boots, Costa Coffee, Clintons, Argos and M&S. However, the retail sector has been undergoing major structural change since well before Covid closed stores for months and turned already thin margins into losses.
The high street’s death by a thousand cuts is symptomatic of seismic change in many consumer sectors, an ongoing shift in shopping patterns that will continue to remove capacity from the town centres until retailers take drastic steps to adapt to the new order. Retailers will continue to shrink unless they provide an engaging in-store experience for millennial consumers who have almost grown up shopping online, as well as demanding discounts. Most of these need a very good reason to venture beyond their front doors to partake in discretionary shopping as a leisure activity.
Throw in data security, investment in store technology, price wars and permanent ‘Sale’ periods, not to mention logistics and seemingly endless supply chain problems, and it’s clear that business owners and management teams are having to keep moving just to stand still.
Operators in this tough sector, from owner-managed single store units to national chains, must develop creative and flexible strategies to protect themselves from seemingly endless volatility. In that way they might stand a chance of succeeding when trading environments eventually become more benign. Retailers should, sooner rather than later, seek professional advice on tenancy and rent issues, store closures, stock control and working capital, technology and operating efficiencies, relationships with suppliers, and support with banking arrangements.
The insolvency toolkit offers several options for breathing space to put retail businesses on a sounder footing. Managers wishing to explore these shouldn’t hesitate to get in touch with us at Buchler Phillips for a free initial consultation.