16 Jan 2019
The shocking closure of retail giant Woolworths in 2008 was the beginning of the slippery slope that many are now calling the decline or “death” of the high street.
The death of the high street refers to the growing number of physical service provision business outlets shutting their doors after being forced to stop trading. BHS, House of Fraser, Poundworld, Toys ‘R Us, Maplin and Blockbuster are just a few recent examples of the so-called retail apocalypse.
Whereas some outlets have closed their doors and stopped trading, many others are holding on and either not making any profit, or are making a loss. Among the retailers in this category are Carpet Right, ASOS, Banana Republic and Debenhams.
So, what is the reason for all of this economic change affecting the UK high street? The article will explore the concept known as “death of the high street” in detail and the factors that may be causing and or contributing to it will be discussed. Steps that can be taken to address failing high street businesses will also be explored in detail.
Some context for the retail apocalypse
Independent quantitative research is a very clear indicator of the phenomenon that many are calling the death of the high street. There are many ways to measure this phenomenon includes looking at overall shop closures in the wider historical context, looking at sales around traditionally busy periods like Christmas and the January sales period and looking at aggregate sales attributable to different types of businesses. Comparative analysis of these trends tell very clear stories about the success of the businesses examined.
ONS research, for example suggests that retail sales figures registered by physical outlets over Christmas 2017 were the lowest in a period of four consecutive years of decline, with another decline projected for Christmas 2018. Conversely, online sales during the same period increased by more than 20%.
Most commentators agree that the phenomenon of businesses with physical premises finding it harder to make profits is not only something that has caused economic devastation, but is something that has only just begun and will claim many more victims before it finishes. Professor Joshua Bamfield from the Centre for Retail Research suggests that there will be as many as 10k further store closures on the UK high street in 2018 and early 2019, with a projected loss of 400k retail jobs before 2022.
So, what factors are to blame for the death of the high street?
Factors affecting the so-called retail apocalypse
Some experts refer to this phenomenon of “death of the high street” as the death of the retail business model, suggesting that the overall problems may be attributed to macro economic cleavages and developments we can do little about. For others though, there are a set of specific reasons that have caused the failing fortunes of the UK high street.
Retail think tank has drawn a comparison between the current performance of high street outlets and the 2008 economic recession, arguing that factors like the devaluation of sterling linked to Brexit uncertainty, general economic uncertainty linked to Brexit, and pressure on retailers owing to the migration of buyers online are to blame for the failing fortunes of high street businesses.
Current research on business rates suggests there is a correlation between this tax and the failing high street business model. An example of the impact this tax can have on a business is M & S. M & S is reported to have paid 184 million in business rates, against a turnover of 9.6 billion in the UK in 2017. Conversely, Amazon, which reported 7.3 billion in profits in 2017, in the UK, paid just 14 million in business rates taxes.
A deeper look at the concept known as “death of the high street” shows us that whereas there is an overall decline in the profits of businesses with physical outlets on the UK retail high street, there are growth areas, offset by areas of exceptional decline within the overall picture of the retail apocalypse.
What businesses are negatively affected by the decline of the high street?
It isn’t just shops selling goods that are affected by the retail apocalypse, lots of other businesses with physical premises selling services to the general public are also falling victim. This includes banks, physical entertainment outlets like HMV and Blockbuster, post offices and travel agencies.
What businesses are benefitting from the decline of the high street?
As with many economic trends, there are businesses that will suffer as a result of certain developments like the death of the high street, but there is a flip side of this – businesses that are growing, partially or wholly as a result.
Online retailer growth is seen by many experts as directly linked to the decline of the high street. Some even say it is the reason that the high street is in decline.
According to recent research, the death of the High Street has also led to the growth of coffee shops, E-cigarette shops, estate agencies, beauty salons and convenience shops.
How to avoid the retail apocalypse
Some commentators are calling for urgent reform of the taxes and government investment in high street premises as a way to avoid or lessen the effects of so-called retail apocalypse. Charitable campaigns like Save The Highstreet have even been devised as a means of providing support to failing high street outlets.
Additionally, lots of business owners are asking how they can plan to avoid, or lessen its effects. There are many strategies that can help, as we outline below:
1. Effective price monitoring strategy
One of the most problematic factors in retail involves regulating price to ensure that competitors are not “getting ahead” by offering cheaper prices. There are lots of ways to monitor price and these include monitoring competitor offers, keeping an eye on competitor postage and packing fees and evaluating sales of similar products and what price these are being sold for.
Price monitoring can be performed manually, but many retailers turn to price monitoring software to help them solve the problem of price monitoring. This allows them to quickly access the comparative information they need to enable them to make strategic pricing decisions.
2. Drawing customers in with unique and innovative experiences
A great way to shield your business from the economic devastation affecting the high street is to think about how the business can incorporate innovative experiences that cannot be matched by someone merely buying online. This creates the impression that by shopping for the same products available online, the buyer is “missing out” on something extra by not visiting the physical store premises.
Simple things like face painting and competitions linked with physical attendance at the shop to buy products also available online can insulate a business against the swingeing economic losses that are affecting high street businesses.
3. Expand business into economic sectors that are growing
In 2016, as a response to falling sales on the high street Waterstones took the decision to introduce their own brand coffee shop, to be incorporated within their stores. This created a unique and innovative experience for shoppers which could not be replicated by merely buying books online and this is one of the steps that has shielded Waterstones from the wider economic problems besetting the high street.
This strategy was particularly effective, because it took advantage of the growing demand for coffee shop services within the UK as a whole.
Coffee shops have held a unique appeal within the UK market and are known to continue to grow despite the decline in other high street outlets. A report published by Allegra World Coffee Portal suggests that the UK coffee shop market has grown by more than 5% in 2017 and continues to experience economic growth. This strategy was something that Waterstones was able to integrate with reading groups, craft group meetings and quiz night events, increasing footfall in the corridors of their bookshop and bolstering sales of books from their stores. Furthermore, Waterstones has developed their own brand of coffee which is sold to their coffee shop outlets, adding further protection to their high street brand.
Ameliorating the retail apocalypse if you are a UK business owner
There can be no doubt that online sales are placing high street businesses with physical premises under enormous financial pressure. However, as this article has highlighted there are many things that business owners can do to lessen the impact of the so-called retail apocalypse and “death of the UK high street”.
Among the factors that have been suggested include devising an effective price monitoring strategy, expanding a “vulnerable” business brand into areas of economic growth and adopting unique and innovative strategies to make the physical shopping experience more enticing to customers in the hope of persuading them to forgo the online shop in exchange for a return to traditional shopping methods.
Are you interested in price monitoring? Request a demo today to see how Competitor Monitor could benefit your business.