Behind the numbers

Last week we discovered that approximately 11,000 chain stores closed in the first half of 2020. We look at the reasons why, and examine who has been hit the hardest.

The proportion of sales moving online has had an adverse effect on store sales for some time. The effects on the economy from Covid, however, has been the final straw for some.

Stores closures include retail, F&B chains and services (Local Data Company; PwC). Whilst approximately 5,000 stores opened during this period, there was a net decline of c. 6,000 stores, twice as many year-on-year and the highest number of closures in five years.

Location
Certain geographic locations suffered more than others, with city centres hit particularly hard. Central London had more store closures than the UK average, driven by a large proportion of workers continuing to work remotely (a third of the UK workforce continued to work from home in the 4-weeks to 4th October 2020, BICS).  In addition, a significant decline in tourist visits to the capital (forecast 74% decline of in-bound tourism to the UK in 2020, according to Visit Britain) has had a marked impact. Central London is also the worst affected area in terms of footfall recovery (Springboard), with footfall down nearly 50% year-on-year on Saturday 10th October (vs. year-on-year decline of c. 30% across the UK).

Regional cities have experienced a similar level of footfall decline with York and Newcastle upon Tyne the worst performing areas in terms of net change in shops year-on-year. Like London, cities across the UK are suffering from lower footfall from workers and tourists, and many people (especially the elderly) continue to avoid city centres if they can. Market towns have fared better, however, in terms of footfall recovery and towns in London's Green Belt, such as Ruislip and Pinner, saw the fewest store closures. These towns benefit from more people working from home, and committing greater spend to their local town centre throughout the week, by shopping and grabbing lunch.

Retail format
In terms of net store closures, high streets were the worst affected location, followed by standalone out of town stores. Footfall at retail parks continues to recover at a quicker rate than at shopping centres and on high streets. This trend is driven by the nature of out of town schemes, their outdoor space and larger store sizes. This allows for easier implementation of social distancing and queueing initiatives which in turn provide customer reassurance. Retail parks typically have varied retail and F&B offers and the larger stores also allow for wider product ranges: an advantage over some high streets and shopping centre locations.

Sectors
Value-driven retailers and supermarkets are among the `winners' in physical retail. Aldi are pushing ahead with UK expansion plans and propose to open a new supermarket each week in the lead up to Christmas, creating 1,200 jobs.

However, more challenged sectors include clothing & footwear and electrical stores. Both face high levels of competition from online competitors. Recent closures include Oasis and Warehouse, as well as John Lewis announcing eight store closures, including two full-sized department stores in Birmingham and Watford.

The hospitality industry is also facing huge challenges, as social habits have been forced to change. Whilst the Eat Out to Help Out scheme helped encourage consumers to dine-out in August, new restrictions including banning people from socialising with other households and a 10pm curfew for restaurants, pubs and bars is another setback for the hard-hit sector.

Adapt and diversify
As retailers look to rationalise operations and evolve their offerings, we will see the more resilient brands succeed. Covid has sped up a gradual shift in consumer shopping habits, and with more local restrictions being introduced across the UK and the approaching end of the furlough scheme, the retail and F&B sector will face sustained challenges for the short to medium term, with more store closures likely to come.

It is imperative for landlords and local authorities to work collaboratively with occupiers to maximise sustainability and diversify uses to react to less demand on the high-street from retailers, as well as explore how its offer fits in with the wider retail landscape in the area, to ensure they remain at the heart of communities.

Sophie Pisano