17 Feb 2012

Pound stores prosper as chain stores decline

Home Affairs Correspondent

Chain stores are closing 14 town centre shops a day as falling sales push high streets further into decline. An expert tells Channel 4 News the situation calls for ‘drastic’ change.

The impact of the decline of the high street has been felt keenly by retailers who own multiple shops. Retailers with more than six shops closed more stores than they opened last year.

However shops at the low-budget end of the scale are doing well, with pound stores, charity shops and supermarkets all seeing store numbers increase.

But official figures released on Friday show there was an unexpected jump in retail sales in January, with shoppers buying furniture and sports goods. Sales increased by 0.9 per cent to give an annual rise of 2 per cent.

A study by PriceWaterhouseCoopers and the Local Data Company looked at 500 of the biggest town centres in the UK and found that shops selling books, electrical items and home furnishings were the hardest hit, along with pubs and off licences.

Retail sales falling across the UK

The research comes as the Office for National Statistics announce that UK retail sales volumes have fallen 0.4 per cent in the months of December and January.

The loss of chain stores is a change from the normal pattern of the past few years, which have seen an expansion of larger retailers as small independent stores closed branches.

Now, says Mike Jervis of Price Waterhouse Coopers, it is the chains that are being forced to close: “If you look at the name of some of the retailers, particularly those who have one through insolvency proceedings, names are generally getting bigger and bigger.”

Among the high profile retail collapses of 2011 were Jane Norman and Habitat. Habitat alone went from owning 30 or 40 shops in the UK down to just three. Experts point the figure at the growth of online and out of town shopping.

Once you get three quarters of the shops on a street closing, the rest go quickly. Mike Jervis, PriceWaterhouseCoopers

Mr Jervis told Channel 4 News that companies need to know when to stop expanding their business: “In the good days retailers open stores quickly so over-expansion happens. The ones with good management teams are reigning it in but there are incentives from landlords to carry on expanding.

“It can be good for short-term cash flow reasons – a lot of landlords will make that expansion rent and set up free for the tenant – but it’s not always good in the long-term.”

Habitat shop on Regent Street (R)

Closures trigger wider decline

He points out that it can be difficult to rent out a shop space if there are other closed spaces nearby: “If occupancy levels are falling, if you get one, two, three shops going out of a row of 20 it’s okay, but once you get three quarters on a street closing, the rest go quickly. It’s about footfall and consumers start going somewhere else. Something dramatic needs to be done.”

Some parts of the UK are looking at 30 per cent vacancy rates on their high streets. Greater London saw the biggest number of closures of chain stores, with 101 closing but other areas, including Scotland and Yorkshire and Humberside were also badly hit.

Low budget shops have become more trendy, more acceptable to middle class shoppers. Frugality is a trendy trait to have .Mike Jervis, PriceWaterhouseCoopers

But not everyone is doing badly. Lower budget shops are proliferating, with pound stores and charity shops opening more spaces. Jervis says they have a new image: “They have become more trendy, more acceptable to middle class shoppers. Frugality is a trendy trait to have.”

He believes that the way to survive in tougher times is to be creative with the retail space available: “Be realistic about how you use space – use it as a showroom, or for demonstration of services and products or a click and collect service. They can put retail theatre into their shops.”

And as for the landlords? “They have to be practical about how much rent they get. Some rent – even if it’s seasonal or monthly – is better than none at all.”