High Street Cleansing: The decline of high street stores has been a clear and steady one.
But have we been blind to the trend? We have just “reached a crossroads” according to retail analyst Richard Hyman (speaking to computerweekly.com).
But how did we get here? And were there signs we ignored in the retail sector, or thought little of?
The trend began before Woolworths
Woolworths was once a heavyweight. The 820-store chain had sales exceeding £1billion at its peak. Unfortunately, like many others, it struggled to deal with the financial crisis and went into administration on 26 Nov 2008. The result? One of the UK’s best-known names (nearly 100 years old) disappeared from the high street, and 30,000 people lost their jobs.
Therefore, because of the timing, Woolworths’ collapse was deemed solely the result of the crisis.
The same trend can be seen in media retail
ChoicesUK was the second-largest chain of DVD and video game rental shops in the UK during the 90s and early 00s. However, the threat of the Internet proved a tough task to handle regardless of success. Even after re-branding a few years before, ChoicesUK went bust in August 2007. Ironically, Blockbuster bought 59 of its shops in September.
It proved ironic as Blockbuster then went into administration six years after this purchase. But it too fell to the trend.
We can now look back at these years and draw a connection. From Woolworths to the recent fall of Toys R Us. From ChoicesUK and Blockbuster to the continuous struggle of HMV.
What are the reasons for the trend?
It seems the root and reasons for the closure of big brands is still misunderstood. Woolworths fall was placed on the financial crisis. And much of recent big brands’ closure has been put down to the growing strength of e-commerce.
But is that full picture? According to the BBC these various key issues may have also have had an impact
Consumers are spending less because of rising shop prices – imported goods are more expensive because of the fall of the pound – and weak wage growth.
The shift to online shopping
More people see online shopping as cheaper and easier than going to the shops. And as retail sales grow weak, online sales continue to shoot up.
As they are, high street retailers just aren’t what the wider public are looking for anymore. People are looking now to have a better shopping experience – being entertained as they shop for example.
Payroll costs and business rates are on the up. Which is consequently “deterring investment in local communities, causing shop closures and job losses in hard-pressed communities and preventing retailers from delivering what their customers want in an efficient and cost-effective way.”
Too many shops
Many companies over-expanded during their good financial years, which has now left them dangerously exposed. Leading to redundancies, mass shop closures, and many falling into administration.
Too much debt
Because of their overexpansion, many retailers are now in debt. Just before its collapse, Toys R Us UK faced a VAT debt payment deadline of £15m. It would have been unable to pay it without a cash injection from an outside investor.