Figures from business advisory firm Deloitte show that the number of retail administrations increased by six per cent in 2012, and with the recent collapses of Jessops, HMV and Blockbuster within a single week, remaining positive about the outlook for 2013 is a difficult task.
Confirming that these figures are unlikely to improve in 2013, Heath Podvesker, Executive Vice President of marketing analytics firm MarketShare, told Retail Gazette: “There are still a number of retailers with the deadly combination of poor business strategy and too much debt.
“These zombie companies are likely to close in the near term.”
Due to retailers falling into administration and cutting down store portfolios to avoid financial difficulties, the Local Data Company (LDC) found early in January that more than 1,400 individual stores were at risk of closure.
As this included analysis of such retailers as Jessops and Blockbuster, it is clear that some of these stores have already closed their doors, and the LDC’s Director, Matthew Hopkinson, told us that, by the end of 2013, up to 4,000 stores could have closed across the British high street.
But it is not just those retailers which have collapsed into administration which are affected; those left behind on the high street also feel the impact.
Julie Palmer, a partner at corporate restructuring firm Begbies Traynor, told us: “There must be a knock-on effect from the fact that the high street is becoming a less attractive place all the time.”
Speaking about entertainment retailer HMV, which has more than 400 stores across the country and called in administrators on January 14th 2013, she said: “They were one of those flagship stores that you’d expect to see when you went out shopping so if that ends up as boarded-up space then it’s going to be even less of an attraction for people to go shopping there.”
Palmer also discussed the other factors which draw people away from the high street, including expensive and limited parking and increasing competition from other channels.
With the IMRG Capgemini e-Retail Sales Index predicting that the online retail market is set to grow by 12 per cent in 2013 without a comparable increase in consumers’ disposable incomes, the digital space is becoming a source of serious competition for the high street, and Palmer also emphasised the threat of the supermarket as a “one-stop shop” which makes shopping quick and easy for consumers.
But Chris Edger, Professor of Multi-Unit Leadership at Birmingham City Business School, stressed that it was important to remember that the generalisation of a high street in crisis does not apply everywhere.
He told us: “What you’ve actually got on the high street is winners and losers and what you have to do is understand how the winners are doing well.”
Adding that there would be a “reformatting of retail” in the near future, he said: “The restructuring that is going to take place is capitalism at work.”
One of the changes that could take place as the high street adapts in 2013 is that shop size will become less important, as the LDC figures show that retailers with smaller store portfolios often perform better.
According to the figures, 92 comparison goods retailers including the recently-collapsed firms Comet, HMV and Jessops have more than 300 stores in their portfolios.
Meanwhile, department store John Lewis, which saw record sales of £91.8 million in the first week of its post-Christmas clearance period, has just 41 stores across the UK.
Discussing how high street retailers can become winners, Podvesker told us: “They need to take a look at their strategy and business model and assess their ability to be competitive and profitable.
“Campaigns no longer work, it’s truly about real-time engagement with your customer across all platforms.
“And it really doesn’t have to be costly to make this work.
“A little bit of investment across these channels and the right product will help move your high street woes into high street highs.”
The importance of multichannel was reinforced over Christmas, as online sales soared for retailers including Sainsbury’s and House of Fraser, and the British Retail Consortium-Google Online Retail Search Monitor showed that tablet search volumes increased by 238 per cent in the fourth quarter of 2012.
Some high street retailers managed to develop their multichannel offer sufficiently to benefit from such increases in online activity, as figures from online investment company Nutmeg revealed that general merchandise retailer Argos saw a 50 per cent rise in the number of purchases made through tablet devices in the fourth quarter.
Click & collect services also proved profitable for high street retailers, as a Steria survey revealed that these services are popular with 41 per cent of 25-34-year-olds and 39 per cent of 35-44-year-olds.
Matthew Hopkinson, Director of the LDC, also told us that retailers will continue to use their high street shops as a showcase for goods which can be purchased online, saying: “We’ll start to see that it’s more about the experience.
“It’ll be about service combined with selling to create added value and convince people to pay that bit more.”
But inevitably, as retailers are forced to cut down store portfolios and embrace multichannel, the problem of empty shops on the high street will continue unless an alternative use is found for them.
Julie Palmer commented: “Longer term, the planners have got to accept the fact that the look of the high street may well change and it won’t be a purely retail-based high street from now on.”
Explaining that hairdressers, charity shops, pop-up shops, coffee shops and restaurants will remain a fixture, she added: “Maybe some of the high street does need to go back towards residential use.
“If you had a residential community there, at least that would provide an infrastructure to support high street businesses.”