For those who aren’t from the UK, the “High Street” is what we call the shopping parade in a typical town or city. It lies at the heart of the town, quite different to a mall, and is more of a European concept. “Cascade failure” is what we say when one part of a system causes another part of the system to fail, often like a set of dominoes falling. Putting two and two together: I believe that the UK High St is in such a failure mode right now, and that over the next five years we’re going to see some very rapid changes.
There will be a lot of people reading this and shrugging their shoulders. For some time, the High St has been experiencing “difficult trading” – the rise of out-of-town shopping (the American mall concept) to begin with, later followed by online shopping. For someone to say that the High St is struggling is a statement of the obvious; few, though, seriously believe that as a concept it is going away.
Wistful nostalgia
Most people in the UK can point at specific shops they remembered in their youth that are no longer with us:
- Record chains, such as Our Price, Virgin/Zavvi, or HMV
- Department stores, such as BHS, or C&A
- General stores, such as Woolworths
- Electronics, such as Phones4u, Rumbelows, Dixons, or Comet
- Furniture, such as MFI
It has always been the case that chains and well-known shops would fold. Harrod’s has sailed very close to the wind at times, for example. Much of the time, the fault can be laid at the door of bad management, and you can point to equivalent chains that rose up to take their place – we may no longer have JJB Sports, but we have Sports Direct.
Many shops will have passed on without people realising. We all hear about it when Toy R’Us or Blockbuster closes, but what about Tie Rack, and Barretts? What about The Gadget Shop? In truth, there are many brands in retail which continue to have excellent name recognition amongst the public – but no longer exist, even online.
What’s different now?
In the past, when stores have failed due to bad management, competitors have grown to take their place, at least somewhat. When Focus DIY went out of business, Wickes and B&Q became larger.
Aside from the credit crunch in the 2008-era, specific sectors of the High St have had problems, but it hasn’t led to general malaise. As electronics stores left, their places were filled by clothes stores or bookshops.
Walking down a regular UK High St in recent years, though, and you see a very similar pattern across the country:
- many units standing empty, or occupied by “pop-up” shops – offering vaping accessories, mobile phone cases, seasonal goods, that kind of thing
- increased numbers of gambling and “pound store” (dollar store) type shops
- more coffee and sandwich cafes
- increasing conversion to clothing and footwear
Now, stores up and down the country, in all segments of the market are encountering problems. To whit:
- Mothercare, Next, Moss Bros, Carpetright all warning about future profits, and in some cases planning to shut stores;
- Jamie’s Italian and Byron burgers entering CVAs, Prezzo shutting outlets;
- Poundland closing 100 stores;
- Fenwick entering into employee consultations about restructuring.
Added to that, we know Debenhams and House of Fraser are having severe difficulties. M&S has been a basket case for a number of years now. Beyond the published financial woes of these business, you actually only need to walk into some of these stores to get a feel for how they are doing.
As an example, WH Smith is currently profitable – but I have not walked into a store of theirs in good condition for some time. Most of them are extremely worn, with poor merchandising.
Cascade failure
The High St has already lost a lot of “name” stores; the ones which are operating most successfully are highly focussed and specialist. However, what draws people into the High St is the range of shops within a short walking distance. You wouldn’t necessarily call it a destination, but the average shopper is definitely going into multiple stores – probably four or five.
As each of these names disappears and fails to be replaced, there are fewer and fewer reasons to go into town. This is especially problematic with the department stores having such trouble, because the broad-based appeal of the shopping environment is diminishing.
Demographics are set against the High St, too. Younger shoppers have more disposable income but are more likely to buy online from their ‘phone. Older shoppers are still using the High St regularly, but don’t generate the same level of sales or purchase the same variety of goods.
I believe the following:
- there is a floor, created by the minimum wage, business rates in the area and prevailing store rents, which it’s not possible to break below (except by breaking the law, obviously), and that many High St businesses are unprofitable because they cannot cover those fundamental costs with their revenue – simply put, the market will not support those businesses,
- as stores continue to retreat from the High St, both footfall and spend will continue to decrease, and the market will continue to shrink,
- that we have passed a tipping point: there is insufficient time and capital to restructure these businesses into a profitable shape that will allow them to continue sustainably, and prevent the market from shrinking further.
My gut is that this will play out over the next three years, but that next January will be especially difficult for many retailers, and that by next year a substantial number more will be gone.
It’s not clear to me what is going to replace them. Online shopping will continue to grow, obviously, and there will be broader functions for many stores – a better story about online integration, for example, or more options in terms of pick up and delivery. However, I do expect the number of retail units to fall drastically and, in some towns, simply disappear.
