Insight: Is in-store shopping past its sell-by in Scotland?

Toys R Us and New Look in Craigleith shopping centre, Edinburgh. Picture: Ian Rutherford
Toys R Us and New Look in Craigleith shopping centre, Edinburgh. Picture: Ian Rutherford
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For high streets, retail parks and malls to survive the growing roll call of closures, tenants will have to be even leaner or offer something very different, writes Jane Bradley

At Edinburgh’s Craigleith shopping centre, Toys R Us workers are removing empty shelving units from the shop floor. Discount signs are visible on every wall and display.

Colin Borland of the Federation of Small Business Scotland

Colin Borland of the Federation of Small Business Scotland

The staff, putting on a brave face for the handful of customers who are scouring the depleted stock for bargains, all know the store is going to close, but they have not yet been told exactly when it will happen.

The mood is despondent. “How else can you feel in this situation?” asks one young man, who does not want to be named. His position at the store, which only opened in October amid much fanfare, is his first job since leaving school. “I’ll have to start looking for something else,” he adds.

His colleague, who has worked in a string of retail jobs, is not hopeful either. “I think people know it is all going to go online eventually,” he says. “Companies are just preparing for that. That’s what our customers are telling us. They often come in here to look at things or try them out, then buy them on the internet.”

The toy chain is one of a raft of retailers which has fallen into the hands of administrators in recent months, resulting in the loss of hundreds – if not thousands – of Scottish jobs. Some Toys R Us stores have already closed, while others, like the Craigleith branch, are remaining open until the stock is sold off. A total of 3,000 jobs are to be lost at the firm, including those at its eight outlets in Scotland.

Analysis out last week revealed that around 21,000 jobs have been lost across the UK since January, after companies such as electronics retailer Maplin – which employed 177 staff – and services firm Carillion collapsed alongside Toys R Us. Meanwhile other high street brands, such as fashion chain New Look and Select – which has no branches in Scotland – have unveiled plans to reduce the size of their physical store network amid debt struggles.

The New Look outlet at Craigleith, unfortunately positioned right next door to Toys R Us, is among the five Scottish stores earmarked for closure, although this has not yet been confirmed to staff. UK-wide, 50 shops are likely to close with the loss of around 980 jobs. One New Look staff member, who has worked in retail for her whole career, is uncertain whether she will remain in the sector. “We’re just getting on with it for now,” she says. “If it goes, then I’ll need a new job, but I’m not sure now whether I’ll look for something else in retail or not.”

The retail sector is not the only one facing closures. Restaurant chains, including Jamie’s Italian and Prezzo, have announced plans to shut a number of their outlets. Prezzo has earmarked three of its Scottish eateries for closure – one in Edinburgh and two in Glasgow – while burger chain Byron is also to close two of its Scottish branches, in Glasgow and Aberdeen.

The experience is reminiscent of the late 2000s, when retailers began to fall like dominos as the country entered a deep and lasting recession. The so-called credit crunch, one of the worst recessions in living memory, saw the demise of big name brands including Woolworths, bookshop Borders and furniture store MFI – in addition to the struggles faced by the UK’s financial institutions.

Leigh Sparks, professor of retail studies at the University of Stirling, believes that some of the recent collapses are symptomatic of failures within the businesses – and says the sea change will potentially result in a leaner, more consumer-orientated retail sector.

“We have some retailers in that mix which have not done a particularly good job,” he explains. “For example, when Toys R Us came to Britain, it was innovative and new. Yet the Toys R Us you see today is pretty much exactly the same as it was when it first opened – it hasn’t grown or offered the consumer anything new.

“The current pressure on retailing is weeding out the poorer retailers. We will undoubtedly be left with a smaller retail landscape. If it is smaller and becomes concentrated so it provides space that people want to use, then it will be a better landscape.”

He also points to fundamental structural change, such as the advent of online shopping and a change in consumer behaviour. “Consumers are going to different places to look for different things. It is not a pretty landscape for most retailers.”

What is not clear, Sparks says, is where the money will go which would otherwise have been spent in the stores which have closed. “If, say, a New Look store in an out of town shopping centre closes, will people who would have shopped there spend their money online or in the New Look in the nearest city?” he asks. “That is what we haven’t worked out yet.”

He points out that the vast majority of the collapsed retailers are focused on shopping parks rather than town centres, leaving gaping holes in some sites.

According to data released at the end of last year by the Local Data Company, which crunches numbers relating to shop vacancies in Scotland in its annual Retail and Leisure report, Callendar Square in Falkirk and the Wellgate Shopping Centre in Dundee had the biggest proportion of empty shops in Scotland, with 64.9 per cent and 47.6 per cent vacancy rates respectively.

“When you look at retail parks, there is no doubt that some ,where there is almost no-one left, are going to have to be repurposed,” says Sparks.

Graham Soult, retail consultant at CannyInsights.com, is concerned that there is no obvious retail sub-sector waiting in the wings to fill the gaps left by the large retailers.

“Last time, when Woolworths collapsed, there were a lot of retailers who could take up that space to grow,” he says, pointing out that between B&M stores and Poundland, 900 new stores have opened since Woolworths’ closure – more than the historic company’s entire stable. “I can’t think of many retailers left now who need that kind of space.”

Many sites previously occupied by BHS, which fell into the hands of administrators in April 2016, with the loss of 11,000 jobs, have struggled to find new occupants. Analysis carried out last year – 12 months after the closure – revealed that two-thirds of the 164 stores had still not been filled.

In Edinburgh’s Ocean Terminal, the former BHS floor space is now occupied by a roller skating rink and indoor skateboard park. “That is a good use of the space,” says Soult. He believes that opening up cities and shopping centres to attract customers outside normal shopping hours as Newcastle has done with its “Alive After Five” initiative is key – but not just for dining and café culture.

“Some of the recent restaurant chain closures have exposed some of the limitations on relying on too many restaurant brands,” he says. “What used to make a visit to Jamie Oliver’s restaurant or Prezzo particularly enjoyable was that you couldn’t find them everywhere, then they started quickly building in size. Eventually, they got too big and it became more like going to an expensive McDonald’s.”

A damning retail productivity report published a year ago by the Scottish Retail Consortium (SRC) claimed that retail north of the border was in a worse state than in the rest of the UK. It predicted that a fifth of Scottish shops would close by 2027. “There is little evidence to suggest the Scottish retail industry is engaged in growing productivity in an economically sustainable manner,” it said. “In essence, retailers are tightening their expenditure in Scotland in order to maintain profitability. That approach is different from what is being seen across the rest of the UK where there is a greater focus on investment in skills and technology.”

Ewan MacDonald-Russell, head of policy and external affairs at the SRC, fears that the organisation’s predictions will prove “depressingly” accurate.

“Regrettably, that prediction that a fifth of shops would close over the decade is looking like it might come to fruition,” he says. “Obviously, we’ve got the technological changes, online and automation and that has changed consumers. People are able to go into, say, a toy shop, look at something, then get out their smart phones and look at the best option for them, which may well be online. We are also seeing a really challenging economic situation. Costs are going up for businesses; we have got consumers with flat wages. Official figures have shown that consumer spending has slowed amid tumultuous world events including Brexit, while inflation has continued to rise.”

Figures out this week revealed that Scotland’s economy grew by 0.3 per cent during the final three months of 2017, with Scottish gross domestic product (GDP) for the whole of last year up 1.1 per cent compared with last year. However, the rise was lower than that of the UK as a whole, which saw 1.4 per cent growth, sparking claims from Westminster of a “significant gap” between Scotland and the rest of the UK.

Meanwhile, a report out last month from Lloyds Bank revealed that only 35 per cent of working consumers have seen their household income increase over the past 12 months. Separate figures released last month by the Scottish Retail Consortium showed that spending was flat for the three months to February. Even Asda’s income tracker, often regarded as a bellwether of consumer spending ability, last week said Scotland was one of just a “handful of regions” which saw gross income growth slow in February.

MacDonald-Russell points to data which shows that the sector has never made a full recovery since the recession. Official Scottish Government data to 2015 – the most recent there is – shows that 1,800 Scottish stores closed over the 2008 to 2015 period, with the loss of 16,000 jobs.

Retail sales growth, which pre-recession was increasing at a rate of around 5.9 per cent a year, has been bumping along at an average of just 0.5 per cent since 2008.

“The retailers that are surviving are those which are adapting to multi-channel business,” he says. “Even companies which are doing well and growing their turnover may not be keeping the same size of store estate.”

He adds: “There has been an anachronistic idea that there will always be retail operations on the high street and that may not always be the case to the same extent. We are seeing an increase in hospitality businesses and services coming in.”

While it is big business moving out of the large footprint stores on shopping parks, small businesses are unlikely to expand to fill the gaps.

Companies operating from properties with a rateable value over £51,000 have a 2.6 pence supplement added to each pound of business rates they have to pay.

“It is exactly the type of property that the government has made more expensive that are proving most difficult to operate from,” says MacDonald-Russell.

Colin Borland, spokesman for the Federation of Small Business Scotland, says that independent retailers and restaurateurs face the same “headwinds” as larger firms in the current retail climate. Around half of small businesses benefit from business rates relief, but the other half do not.

“For those who do, it is an absolute godsend,” he says. “It can be the difference between keeping your head above water and going under. But for those who do have to pay, it is very difficult – not just the amount of money, but navigating the system.

“When you look at the types of sites which are being left by the big chains which have collapsed or pulled out, they are not the sort of places that a small independent retailer is going to want to move into. Do we subsidise to attract businesses, or just accept that the future of these sites are not going to lie solely in retail?”

The latest data from the 2017 report by the Local Data Company, which constantly monitors the make-up of towns and shopping centres across the UK, shows that 11.9 per cent of Scottish retail units were empty last year – down from the previous year’s figure of 12.6 per cent. LDC relationship manager Chris Fowler believes that Scotland still has a long way to go in terms of leisure saturation, which he says could fill some of the vacant units. The Scottish report showed that an additional 325 leisure premises had opened in Scotland since 2013, with almost 100 of those appearing in 2017 alone.

“Scotland could improve more on that front before it finishes,” he says, pointing to towns in England, where a gym brand is already touted to be eyeing a number of vacant Toys R Us sites. And the LDC’s data shows other signs for hope. A number of Scottish towns, including St Andrews, Aviemore, Gretna, Inverurie and Biggar all had no persistently vacant units last year.

Retail consultant Soult is even more optimistic. “People have the impression that it is all doom and gloom and everything is closing,” he says. “But if you take a step back and look at what’s there, there’s a lot to be excited about.”

The figures

0: retail units are persistently empty in five Scottish towns: St Andrews, Aviemore, Gretna, Inverurie and Biggar

11.9: per cent of Scottish retail units were empty last year

64.9: The proportion of units which are empty in Callendar Square

shopping centre in Falkirk

325: leisure premises opened in Scotland since 2013, with almost 100 of those appearing in 2017