Terry Murden: Changing habits prompt new ideas to revive the high street

Terry Murden
Terry Murden
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MOUNTING casualties are forcing retailers to revise their business model, writes Terry Murden

Hard-pressed retailers were relying on bargain hunters to give them a festive lift, but the crisis on the high street shows few signs of abating.

Retailers had a year to forget as more big names went to the wall and others, such as HMV, struggle to stay alive. A report before Christmas from accountancy firm Begbies Traynor warned that 140 retailers are in a critical condition and that another wave of companies will go bust in 2013.

They include bookshops, chemists and off licences, which face severe competition from supermarkets, online trading and the shift in technology.

The pressure on retailers was laid bare by recent figures from the British Retail Consortium (BRC) revealing more than one-in-ten shops were empty in October. The BRC said the UK town centre vacancy rate of 11.3 per cent was the worst figure since its survey began in July 2011.

The crisis will bring a number of issues to the fore, including pressure on the authorities to consider the impact of vacant premises on rental levels and business rates revenues.

Already measures are being considered to revitalise high streets and town centres but a wave of closures may prompt more immediate and material action, such as introducing newer kinds of activities such as leisure and entertainment, or turning retail outlets into residential property.

It is also making retailers sharpen their act and those that have succeeded have worked hard to capitalise on changing consumer habits, particularly the trend towards click-and-collect where shoppers order online and pick up their goods in the store. It has made some companies rethink the way they hold stock.

The causes of retail failure have been varied. Sluggish demand from hard-pressed consumers is only part of the story. Certainly the tightness of domestic budgets has been a factor, encouraging shoppers to move to discounters – Aldi and Lidl have been big winners among the supermarkets – though the luxury end of most sectors has thrived as those with money have taken advantage of low interest rates and retailers offering good deals.

Structural change has also been evident, as local convenience stores have succumbed to encroachment by the supermarkets, and book chains to online buying and to the emergence of electronic books.

Some retailers have failed because they have mismanaged the changes in trading conditions, finding themselves with too many stores, a poor online offering or a range of stock or products no longer in demand.

By far the biggest collapse of the year was the failure of consumer electronics chain Comet two months before Christmas. Around 6,900 jobs – including just under 5,000 shop staff – were lost after administrators Deloitte closed all the stores without finding a buyer. In particular, Comet was knocked by the lack of first-time home buyers, who were key customers for the white goods retailer.

JJB Sports was another major casualty, largely through a lack of product differentiation. It was losing £200,000 a day, its stores were in the wrong locations and it was paying high rents. It had 400 stores at one point but needed no more than 80 to make the business work.

When JJB Sports closed, 2,200 staff lost their jobs. Sports Direct owner Mike Ashley bought just 20 stores, the brand and its website for £23.8 million.

Others that went bust included Blacks, later rescued by JD Sports Fashion for £20m, and budget fashion chain Peacocks, which saw 388 of its 600 stores saved in a deal with Edinburgh Woollen Mill. Gift retailer Past Times was another to go under in a new year rush of failures at the start of 2012.

Clinton Cards was another of the year’s major high street victims, with nearly 3,000 full and part-time staff left without jobs after administrators Zolfo Cooper announced the closure of 350 stores. But there was some good news for the chain after Ohio-based American Greetings bought 397 stores and saved 4,500 jobs.

The rescue deal also secured the Clinton Cards brand, which was founded by chairman Don Lewin in Epping, Essex, in 1968.

American Greetings, which was one of Clinton’s biggest suppliers, said it believed the group could be “both an important and profitable retailer”.

Video games retailer Game Group was hit by falling sales and a refusal by suppliers to stock the business. The group, which traded as Game and Gamestation, appointed PwC at the end of March, which triggered the immediate closure of 277 stores in the UK and Ireland – leaving 2,104 staff without a job.

But Game was given a second chance when the brand and remaining 333 shops were bought out of administration by turnaround specialist OpCapita, saving nearly 3,200 jobs.

While electricals chain Comet did not fare so well under OpCapita’s wing, Game appears to be turning the corner.