Retailers are suffering on the high street, indicates a new report commissioned by The Local Data Company, suggesting that approximately 16 shops are being shut a day.
The results found that a total of 987 high street shops diminished in 2014, after 5,839 closures and 4,852 new openings. This is almost three times the 371 that closed in 2013.
The study focused on a variety of retailers across 500 towns in Britain, which found that northwest England and the Midlands were the worst off. The decline can be put down to an increase in online sales, thriftier shoppers and high business rates.
Online sales have increased dramatically with retailers including Manchester based Boohoo reaping the rewards of tech-savvy consumers. The online fashion site posted a 27% increase in its annual revenues for its full year revenue, following a boost from mobile traffic. Its customer numbers have also risen 29% to 3m, with more people shopping online for the best in digital deals.
While most high street stores have suffered over the last year, the LDC report found that budget pound shops were actually opening more branches during 2014, as consumers are becoming increasingly cautious. Retailer Poundland benefitted from media exposure on television show, ‘Posh People: Inside Tatler”, opening up its demographic to frugal customers on higher incomes. As a result the company opened up 51 new stores across Britain last year, after reporting £1bn in annual sales in March 2014 - a 13.3% increase from 2013.
Mike Jervis, a partner at PwC highlights that supermarkets are no longer opening convenience stores as they did in 2013:
“2014 was supposed to be the year when we saw the comeback of consumer confidence and spending and that is not reflected here” (in the LDC report).
However, while penny-pinching customers are pushing budget stores, the high street is deteriorating, as sky-high business rates means smaller retailers are struggling to break even.
Around £25bn is given to the Treasury every year in Business Rates, affecting both stores and company warehouses. This has been particularly detrimental for the high street, resulting in governmental changes set to take place next month. The modifications will change the age old law that originated in 1601 (Poor Law), to ensure that all businesses are taken care of. Danny Alexander, chief secretary to the Treasury stated:
“The time has come for a radical review of this important tax. We want to ensure the business rates system is fair, efficient and effective,” said Danny Alexander, Chief Secretary to the Treasury.
Rates will now be based on a company’s overall worth, not just its property value, to ensure smaller retailers don’t continue to depreciate. Though it has not yet been announced where the government will find the replacement funds, the decision is a move in the right direction for ailing businesses.