What do the experts say about the openings and closures of Britain’s shops in first half of 2015?

Yesterday was LDC’s 5th Shop Openings and Closures Summit held at the offices of the law firm Hogan Lovells. The event was based around the report published and presented by LDC on the openings and closures of over 21,000 shops, pubs and clubs in over 2,700 towns, cities, shopping centres and retail parks.

The aim of this blog is not to repeat what was in the presentation or that is in the report. A summary of the report and slides is available to all from http://www.localdatacompany.com/reports and the full report is available to LDC customers.

You may also be aware of PwC ‘s press release of last week that looked at the chain retailer changes in top 500 town centres as well as the bira release that looked at independents in the top 500 town centres.

The panel of experts was led by Samantha Fenwick from the BBC’s consumer affairs programme ‘You and Yours’ with Simon Danczuk MP for Rochdale who has run a shop in the past and is chair of the all party small shops group in Parliament, Chris Shellard who is an ex local authority planning head and now leads regeneration projects for Lee Valley Estates, Anthony Newton who is a lawyer at Hogan Lovells and advises luxury brands, Michael Weedon who is deputy chief executive of the British Independent Retailers Association (bira) and Zachary Gauge who leads research at UBS who are investors in UK retail property.

Some of the key discussion points from the event are below;

  • From 2007-14 35 million square feet of supermarket space was built which is the equivalent of Asda’s floorspace. Many supermarket leases are up for renewal in next 5 years.
  • Lee Valley estates Tottenham Hale development is the first of its kind to mix retail, leisure, residential and medical services together. They have the largest non-hospital dialysis unit in Europe. The adjacent retail park has an ambition of creating a town centre! Their gym is now oversubscribed and sometimes has 30 people working out at 3am! What this shows is that lifestyle changes are now determining occupation trends. Retail can no longer survive on its own.
  • Rather than just being ‘difficult’ times ahead it is about ‘different’ times ahead with Government having increasing impact through the devolution of business rates, the national living wage and changes to tax credits that might result in people withdrawing themselves from employment.
  • With regards to planning, which is key to the changes required, it was agreed by all that local authority planners are poorly informed and when they are informed, the advice comes from the property sector who have a vested interest. There is no evidence of thought or imagination from most local authorities and is this because of cash, will and if not then what?
  • One of issues around town planning is that it is very emotive as it involves more people and more history. The ability for councils to raise money based on future rateable income is having a positive impact. It is more possible to regenerate as a result but a lack of political will and poor quality of the leadership are the issues. A good example is Argent in London (Kings Cross) and they are now going to do the same to Cricklewood. It can be done!
  • The proposed devolution of business rates announced by the Chancellor at the Conservative Party conference last month has taken many people by surprise, not least the civil service! The Autumn statement is key to understanding the what and how. The ramifications of what is proposed are enormous. Is a council’s priority creating a healthy retail and leisure environment or is it to just raise additional income through taxation. Can the two run in parallel and where?
  • The number of shops to cover the country have fallen significantly and the numbers tell us that the lifespan of a limited company averages 7 years so churn is to be expected. The numbers over time, however, show that the death rate has risen rather than the birth rate has fallen. For independents two thirds of them are sole traders/partnerships so they do not have the exit options open to the larger retailers such as CVAs everything is against their livelihood, their house!
  • Online penetration levels by business types vary considerably and money these days is being spent on experiences and not goods. This requires innovation and examples include coffee shops in kitchen shops or others where engagement is created through entertainment or involvement. Look at how many restaurants now use their kitchen as the theatre.
  • The introduction of the Living Wage will have a big impact and an example cited was an owner of four convenience stores in Manchester where he will see his costs rise by £60,000 a year which means he will have to lay off staff to rebalance. Staff turnover of bira members was quoted as being 3.5% whilst the average time served at Amazon is just a year. Who is building stable communities?

Finally, everyone is anxious as more and more complexity and costs are being added but with unknown impact. The one impact that retailers know for sure is the impact it is all having on their profitability. So the message is:

We are still in difficult times but understanding what is different and how to work with the differences to your advantage is what will lead to survival and success.

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