What does the closure of House of Fraser’s London flagship mean for the UK high street?

House of Fraser's flagship store on London’s Oxford Street is to permanently close next year after being given notice by its landlord. Since Sports Direct owner Mike Ashley acquired the brand in 2018, House of Fraser has notably struggled. Retail Gazette finds out what the closure means for the British high street.

House of Fraser
Frasers Group confirmed on Wednesday that the flagship store on London’s Oxford Street is set to permanently close

A week after reporting that its London flagship store will be revamped with £100 million investment, House of Fraser surprised the retail sector by announcing that it has been evicted from Oxford Street.

Frasers Group confirmed on Wednesday that the flagship store on London’s Oxford Street is set to permanently close.

Since billionaire owner Mike Ashley acquired the department store chain in 2018, the business has “worked collaboratively with the landlord to keep the store trading”.

But the House of Fraser store will now close in January next year.

Frasers Group said the store has been trading “three years longer than what was initially proposed by the previous owner”.

It is continuing to “invest significantly into the British high street” and has requested an urgent review of the current “archaic business rates”.

The group said if business rates were reviewed, it would support the future of House of Fraser – otherwise further store closures are inevitable.

House of Fraser
The House of Fraser store will close in January 2022

This news about House of Fraser’s Oxford Street eviction is likely to raise some doubt around the continued existence of some or all the remaining 41 House of Fraser stores across the UK.

The UK retail sector has been asking the government to review business rates for years, and although these were suspended through lockdown and chancellor Rishi Sunak announced some additional ongoing support in the recent Budget, it arguably didn’t address the medium or long-term problem.

“Since their threat to close down a number of stores previously and effectively holding landlords to ransom, House of Fraser seem to have never truly recovered,” Business turnaround specialist Neil Debenham said.

“Their stores are drab, staff levels are low and service is terrible. Their online presence and service is even worse with charging customers to click-and-collect and then giving them a voucher to spend in store in compensation for the click-and-collect charge,” he argued.

“Coupled with difficulties in returning items, it’s no wonder they are closing their flagship store and I would suspect many more to follow.”

Debenham added that House of Fraser failed to adapt to consumer demands for both an in-store and online consumer experience and are subsequently paying the price.

However, he assured that the closure of House of Fraser’s London flagship does not put other department stores at threat, emphasising that the key message here is to change and adapt.

“In a small city or  town, the loss of a store such as House of Fraser would have an impact to the local town centre, but people will not stop shopping on Oxford street because House of Fraser is no longer there,” Debenham told Retail Gazette.

“Other department stores will simply absorb the footfall and welcome the extra traffic.”

House of Fraser
House of Fraser was bought out of administration in 2018

Catherine Erdly, founder of The Resilient Retail Club, agreed with Debenham.

“It’s an indication of the changing ways that we shop. More and more we are seeing that customers want to shop from businesses that share their ethics and values, and often big businesses struggle to make that connection,” she said.

“The House of Fraser store was part of an iconic run of department stores on Oxford Street. With the Debenhams store remaining a boarded-up shell, with House of Fraser going too, it will create a real gap on this key shopping street.

“This does beg the question as to whether the John Lewis department store just a few doors down will be hit also with falling footfall.”

John Lewis Partnership recently said it would convert much of its previous square footage to housing and offices in an effort to reduce unwanted retail space.

Retailers will likely undertake a complete redefinition of what square footage is now required for them to survive in a space such as Oxford Street.

James Pow, senior retail advisor at business advisory firm Quantuma, said that for those retailers that choose to stay on Oxford Street, there are multiple factors to address in order to avoid closure, including redefining what future revenues will be compared to 2019 and what footfall will return.

“While the sector has witnessed over 83 per cent closure of department stores through the pandemic, this position will undoubtedly worsen over the Christmas period into January with further closures,” he argued.

“The House of Fraser store was part of an iconic run of department stores on Oxford Street”

“Mike Ashley has used the pandemic to shrewdly renegotiate his portfolio of high street stores to either acceptable turnover related rent deals or if not achievable closures.”

Central London has undoubtedly been affected particularly badly by the impact of Covid-19, in particular the lack of commuters coming into the city to work as well as the absence of international tourists.

The retail sector was already going through a transformation before the pandemic struck, with Brits slowly shifting online and retailers shuttering swathes of stores to reflect this trend.

Retail expert Nelson Blackley told Retail Gazette that House of Fraser’s store closure marks another move in the shift along Oxford Street from relying entirely upon retail to more mixed purpose use.

“Marks & Spencer and John Lewis have both previously announced they are seeking planning permission to turn part of their Oxford Street stores into offices,” he said.

“House of Fraser are being forced to exit as their landlords have already gained permission to redevelop the site into six floors of offices with retail on the ground floor, a pool and gym in the basement, and a rooftop restaurant, which presumably the landlords think will generate a more reliable source of future rental income than retail.”

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2 COMMENTS

  1. Debenhams has gone and Frasers is going; one would think that opens up a massive opportunity for John Lewis. But no, their plan is to turn selling space into offices when working at home is here to stay and the demand for city office space has passed its peak. Unless a retailer is put in charge at JLP the future is bleak. If I was a JL partner I would be pushing for two things- a proper shopkeeper running the show and an insistence the board examines a possible sale of the business. Come on JL partners, get yourselves organised or the partnership will die.

  2. House of Fraser stores are even worse now than they were some years ago. My local store seems to be an off shoot of Sports Direct. It is carrying some really awful brands. JLP is streets ahead of HOF. Debenhams were too. Sadly they they have gone too. It really is no loss to Oxford Street. Oxford Street is no long a destination for me.

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