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Analysis: How many stores is too many?

The fall of once-mighty retailers such as BHS and Austin Reed – attributed in part to the onerous leases that hung around their necks – has brought about many questions on how many stores fashion retailers really need on the high street.

The growth of ecommerce and consumer demand for an ever-evolving multichannel offer has caused many multiples to examine their own retail footprints and some appear to be out of kilter.

Marks & Spencer announced plans to close nine stores last June, and further closures may result from a review that is due to report in the autumn. The retailer has already shut shops in China and central and eastern Europe.

US fast fashion retailer Forever 21 is also scaling back its bricks-and-mortar offer in the UK. The chain closed its flagship store in Glasgow and its unit at Westfield Stratford City earlier this year, and is “considering all options” for its remaining stores at Bullring Birmingham, Bluewater shopping centre in Kent, Liverpool city centre and on London’s Oxford Street. In the current difficult economic climate, questions about the optimum number of stores are not going away any time soon.

Although there is never going to be one magic number for retailers, property agents point to several newer entrants to the market and some premium brands planning to open 40 to 50 UK stores.

“If you look at Victoria’s Secret, for example, they’ll be after much larger stores in bigger markets. They’ll probably get to around 40 and that’ll be it,” says Tony Devlin, head of high street retail at commercial property agent CBRE.

“The more aspirational retailers are going for fewer and larger stores in bigger markets but for mass market retailers that number increases rapidly to 100 to 200.”

Devlin also stresses that, although closing stores might sound attractive to retailers in theory, it can be much harder to put into practice.

“In 2012, New Look had around 650 stores, which it thought was about 200 more than it wanted. It is probably down to about 600 or so now as a result of leases coming to an end, but the reality is, once you’ve got these stores and they’re making money, it can be quite difficult to close them just because you think it might be the right thing to do.”

There is also a broad consensus among industry observers that omnichannel retail is making a strong store presence more, rather than less important.

“A lot of people are pontificating that the ideal number of stores is 80, down from 500, but I challenge that based on the fact that if you speak to any retailer, they say having a store presence is actually a core part of extending their online presence,” says Matthew Hopkinson, director of the Local Data Company.

Devlin echoes this: “The role of the store is as important as it ever was. Retailers need space to be able to offer click and collect.”

That is not to say that there have not been changes in how customers are using stores in the digital age.

“If you look at the way people are using their leisure and shopping time, they’re meeting friends and still going to stores but using them more as a showroom,” points out Stuart Harris, commercial director and co-founder of retail property developer Queensberry Real Estate. “They’ve got the choice of buying now or buying later when they get home.”

The picture is less clear when it comes to what retailers are looking for when opening new stores.

“Retailers are telling us they want flexibility and I think many are still trying to work out what they want,” says Harris.

“They’re playing around with different formats. We’re seeing Urban Outfitters and Anthropologie trialling smaller formats. There’s a chance some customers will be disappointed with those smaller stores because they want more choice. There’s a lot of trial and error going on.”

Devlin argues the trend for larger stores is continuing: “A lot of our clients coming up to a lease expiry will take the opportunity to upsize if it’s there and it’s quite a common trend. They’re trying to compete more effectively in a very competitive market by offering a better and wider range to customers, like they can find online.”

Womenswear retailer & Other Stories is a case in point. The retailer, which is part of the H&M group, has just taken a three-storey 6,458 sq ft site on London’s Oxford Street for its fifth UK location, which will stock a selection of ready-to-wear collections, shoes, bags, jewellery and accessories.

Retailers are also still waiting to see how the shared fates of BHS and Austin Reed will shape the future of the British high street, as the store estates are divvied up between the highest bidders.

“Going through the Austin Reed sites, they’re generally small stores in relatively nice market towns. Those units will get snapped up by a number of retailers including Office, Joules and Fat Face,” said Devlin.

“Quite a lot of the BHS sites will be split. There’s been a lot of interest from gyms for the top floors of sites, with retailers like H&M or River Island perhaps taking some of the others. People will be surprised by the opportunities other retailers will have with BHS. In a lot of locations, the closures will create rejuvenation, so it’s not all bad out there.”

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