Retail is a dynamic and diverse industry. As the UK’s largest private sector employer, it is a driving force in our economy but we are going through a period of unprecedented change.
There are 2,485 fewer retail stores in the UK than there were three years ago. Just over 16% of all sales were made online last year – up from 12.5% just two years before. Since the beginning of 2015, there have been more than 3,200 retail insolvencies in the UK and a growing awareness of company voluntary arrangements (CVAs) most recently involving high street household names such as Mothercare, New Look and House of Fraser. For customers, the squeeze on real earnings is unrelenting and a drag on spending is expected to continue as real wage growth remains weak.
Politically, there is much the government can do to help relieve some of the pressure on the high street. The business rates system is not fit for purpose. It is a big cost burden – retailers contribute around 5% to the UK economy, yet pay 25% of business rates.
This is simply not sustainable. It acts as a barrier to investment from new entrants to the industry and discourages the reinvention of our high streets at a time when retailers are struggling to adapt to shoppers’ changing habits.
And the growing rates bill is a big part of the calculation when retailers are thinking about rationalising their store portfolios.
We also have to continue to make the case for tariff-free and frictionless trade as vital outcomes for retailers from the Brexit negotiations if we are to avoid increasing prices and creating less choice for consumers.
Operationally, the industry is making changes, too. We have too much retail space. In the future, there will be fewer shops and their role will be different – more engaging and based on creating experiences for customers. Online will continue to grow, but seeing online and stores as two separate channels will become increasingly irrelevant. This will deliver better service and experiences for customers, and enable new emerging brands and entrepreneurs to grow. And the role for technology and innovation will expand exponentially.
The future is bright, but we must create the opportunities to ensure it’s not armageddon retail but reinvention retail.
By Helen Dickinson OBE, Chief Executive - BRC.
This piece was originally published at Drapers.