ACA Insights: Stormy Time for the High Street
An unprecedented decline in shop visitors occurred during March and April, with bad weather being blamed on the 4.8% reduction in shoppers. Several large High Street retailers have recently declared bankruptcy including Toys ‘R’ Us and Maplin, with Claire’s Accessories filing for bankruptcy in the US and stores such as Carpet Right and New Look being forced to close many branches. There is a well-established link between weather patterns and shopping habits, so many are blaming the “Beast from the East” an unseasonably cold spell which occurred during February and March, for the retail slump, but is the freeze in sales solely due to plummeting temperatures?
There is no denying that many High Street retailers are in trouble. A report by the BBC reveals that analysis by British Retail Consortium (BRC) and Springboard shows an unprecedented recent decline in shoppers. Visitor footfall decreased by 6% in March and 3.3% in April, giving a 4.8% reduction over the two-month period; even during the depths of the 2009 recession, a smaller decline of 3.8% was reported for the same time of year. Several other large outlets are also struggling including Debenhams, Mothercare (who are shutting 50 stores leading to 800 job losses), House of Fraser, Moss Bros and B&Q. Today, hundreds of staff at M&S will find out if their stores are closing. Chief executive, Steve Rowe, is shutting 100 of its large clothing and food shops amid falling sales and profits. Twenty stores have already been closed affecting about 900 jobs reports the Guardian, with staff braced for further closures ahead of the announcement of its annual results on Wednesday.
The weather in Britain is a significant factor in retail sales. Hot summers and wet winters will influence how consumers buy and what they buy, weather also dictates when retailers introduce new lines and start their sales. According to Strutt and Parker, good weather in April and May means that shops can introduce their summer lines (beach clothing, BBQs, camping equipment) earlier and these sell well when the weather is good. Should the expected hot weather not arrive however, then a wet summer can lead to sales starting earlier to get rid of summer stock. A long hot summer, conversely can lead to the autumn/winter ranges being discounted early to ensure sales targets are met. Warm winters will lead to a decline in winter stock sales (gloves, blankets, coats), so too much sun at the wrong time can also adversely affect sales. Wet weather can also have mixed impact on retail sales, for some it will mean staying at home but for others they are likely to spend more time in their High Street or local shopping centre enjoying indoor activities such as bowling, cinema and food outlets. When the weather gets too cold and snowy people tend to stay at home, not wanting to risk going out especially in their cars. This causes its greatest impact before Christmas and the January sales when retailers make the largest number of sales. Cold weather forces people to do their shopping online, which is obviously good for online retailers but can have a serious adverse impact on High Street sales and concomitantly on petrol sales as cars are left in driveways.
The “Beast from the East” arrived in Britain on the 24th of February with widespread unseasonably low temperatures and heavy snowfall in large areas. It officially ended on the 4th of March but a second similar weather system led to a resurgence of cold temperatures during 17th and 18th March. The impacts were severe with 17 weather-related deaths. Undoubtedly this extreme weather would have had a serious detrimental impact on High Street sales figures, but was a week or two of very cold weather enough to push so many retailers to the brink? An Editorial in the Observer suggests the reasons for the ongoing decade-long decline of the High Street are multifactorial. Changes in shopping habits mean that one pound in five is now being spent with online retailers. The post-recession Brexit-uncertain economy is fragile, which means less consumer cash to be spread around and real wages have been trailing inflation for a year, as the weak pound has driven up post-Brexit inflation. Many high street brands are now burdened with debt and underperformance due to overexpansion during more auspicious economic times. The BBC report that nearly one in ten shops in town centres is vacant, this has consequences far beyond the economic, High Streets are where people from diverse local communities would interact, but with High Streets now increasingly derelict and blighted by fast food outlets and betting shops there is an increasing risk of atomisation. A Centre for Cities report highlights that rather than the state of the High Street being a driver of local economic regeneration it is actually a marker of the High Street’s state of health. The situation around Britain’s cities is not uniform however, 8 of the 10 largest cities have seen private sector jobs become more concentrated in their city centres, resultingly over a third of jobs in large city centres are in knowledge intensive service activities, such as finance, law and marketing (this is 50% in London). This means large cities are less reliant on retail, which makes up just a few percent of city centre jobs. In medium and small sized cities, the converse is true: an increasing number of private sector jobs are now based away from their city centres, with out-of-town employment sites playing a larger role in their economies. This makes the city centre more reliant on retail (>16%) but with fewer private sector workers coming into the city centres Monday to Friday. The report recommends that rather than focus on retail in isolation, policymakers need to start focusing on the role of the city centre economy as a whole.
The unprecedented decline in retail sales during March and April was undoubtedly exacerbated by the Beast from the East; however, it is a snapshot of a much larger decline in the health of the High Street with socioeconomic impacts far greater than those limited to retail sales and the jobs they provide. The Portas Review of 2011, was set early on in the recession and the problem is more diffuse than simply declining retail sales. The socioeconomic health of Britain’s smaller towns in particular, are dependent on a thriving city centre economy, which includes but is not limited to the retail sector.
