Our high streets are still in crisis with retailers struggling with monster problems such as rising overheads, a shift to online shopping and slimmer profits. Many brands have been closing stores in a scramble to cut costs and more closures are expected. Even places like Nuneaton that have been able to weather the storm better than most other areas is hit hard.
If you’re going to have any hope of avoiding the causes behind the crisis, you’ll have to know what they are first:
1. Overheads keep going up
In addition to the cost pressure of inflation, there’s also the issue of rising overheads. For instance, business rates keep rising and that can deter investment in local communities. There’s also the National Living Wage and National Minimum Wage for people over 25 are increased annually and that costs the retail industry about £1.5bn to £3bn a year, according to the British Retail Consortium. When these are combined with other overheads such as insurance and utility bills, it all becomes too much to handle.
2. The online shopping boom
Given the fact the overall retail market is experiencing minimal growth, success becomes a matter of market share and 20% of that now belongs to online stores. Big shots like Amazon have affected the high street significantly as more buyers consider shopping online to be easier and cheaper than heading out to a physical shop. The growth of online sales doesn’t seem like they’ll be slowing down anytime soon even as overall growth in the market is weak.
3. Less disposable income
Since Brexit, the pound has fallen by nearly 15% and inflation has gone up by over 3%. This has caused imports to be more expensive and the consumers are the ones who get to bear the cost. Also, wages have not been rising at the same pace of inflation, meaning that shoppers don’t have as much disposable income to spend in restaurants and stores. Retail sales grew by 4.7% in 2016, but slowed down to a mere 1.9% last year. For some, it has been a rapid decline and for others, a serious problem.
4. There are too many retail outlets
It’s dangerous for a retailer to have underperforming outlets, considering the tight trading conditions. The problem, however, is too many firms expanded beyond what was necessary when times were good and that left them exposed. Now, some companies have to shut down dozens of stores across the country. The lesson here is perhaps the way to grow a business is not always to open new outlets.
5. High debt burdens
Having too much debt has a great deal to do with having too many outlets. Companies that over expanded know this now, but it’s too late. The ideal out for many brands is to call mayday and shut down their least profitable outlets.
While we can expect further decline of the high street, it’s not necessarily all gloomy. There are brands that will be able to weather the storm.