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Drapers Debate: Should retailers trim the dead wood?

A report from business advisory firm Deloitte this week said that retailers could be putting their survival at risk if they do not scale back their store portfolio in the digital age. This week Drapers asks if retailers should shut stores strategically as online shopping and ecommerce gains momentum?

Yes – Victoria Gallagher

Victoria Gallagher

Unpopular though it may be, retailers should seriously consider this tactic if they want to survive in the tough climate.

The economic data we have seen in the last few weeks suggests this is not a flash in the pan recession – we’re looking at another five years without growth to speak of, and possibly another 10 before businesses return to full health.

Unless you are able to ride another decade of disappointing sales, retailers must trim the dead wood now rather than wait for lease contracts to run out.

Deloitte has predicted that up to four out of 10 shops will have to shut in the next five years – surely it is better to make that decision, offering the rest of the business greater security, rather than waiting for the decision to be made for you.

Clever alternatives area already popping up, and retailers can learn something from that. Far from being the enemy, ecommerce offers everyone an additional platform through which to sell goods.

Taking a smaller space means you can stock select items, but offering customers in-store access to the ecommerce site, with customer assistance on hand, is a sensible way to adapt to a world with smaller high streets. Likewise, Click and Collect stores give shops a bricks and mortar presence without the full commitment of a standard store.

Instead of feeling obliged to have a shop on every high street, retailers should think about showcasing their products in fewer, more high profile, stores that act as flagships. If your brand already has a following then they will want to buy your products whether there is a shop on their local high street or not.

Also by reducing overheads on shutting bricks and mortar stores retailers can instead plough money into other areas of the business - advertising, product development and extensions. You can investigate new digital marketing strategies to keep your brand high in people’s minds.

Online is the one rare area of growth at the moment and a platform that is virtually guaranteed to continue to grow. Instead of investing in stores retailers should instead be looking to the future, investing money in new avenues including mobile optimistised websites and apps.

No – Ruth Faulkner

Ruth_Faulkner_for_web

Simply shutting stores is not the answer.

The country is working its way through a double-dip recession, one of the worst downturns in living history, and Deloitte’s findings cannot be divorced from the general state of the economy.

Undoubtedly as a result of the wider economy, some shops will be forced to close stores that are making a loss to stay afloat. But to sign up to the view that the internet will dominate all fashion purchases, rendering the high street redundant, is a big mistake.

There is a will to revive the high street – the government may not have given it quite the financial boost retailers would have liked, but it’s undeniable that the Portas Review and subsequent Pilots have generated publicity and a sense of goodwill for our main retail streets.

Yet vacancy rates are constantly on the rise - one indie told me he counted no fewer than 19 vacant shops on his (rather affluent) local high street. The problem with closure is that it becomes a self-fulfilling prophecy: consumers will stay away and shop online because they just can’t find what they want in the real world.

Deloitte goes so far as to recommend retailers do not simply wait for leases to come up for renewal, but should adopt closure as an active policy. However this forgets or ignores the costs associated with breaking the contract ahead of time. As long as that store is making even a small profit – or perhaps, even a small loss – it’s worth sticking with it. Even a loss-making store is marketing the brand.

The high street presence is more than just a place for people to buy clothes, and retailers have a unique opportunity to offer something extra. The rise of online is merely providing impetus to introduce new ideas to the business – entertainment, personal experiences and ease are all areas that bricks and mortar can compete against the more impersonal ecommerce transaction.

This is something that Aurora Fashions – the parent company of womenswear retailers Oasis, Coast and Warehouse – have been championing for quite some time. The, now rather over-used, concept of omnichannel retailing has its origins in complete logic.

Retailers must think cleverly about attracting customers into their stores in future – there is more competition out there. But if the Olympics have taught us anything, surely it is to take that competition head on.

Readers' comments (2)

  • www.Anthony&Brown.co.uk

    Retailers will have to cut back on the number of stores as sales on the high street decline and online sales increase.
    Owners of shops should be offering cut price rents more often and rates should be scrapped completely to increase the amount of uptake for new shops.
    The government is shooting itself in the foot by not decreasing rates, if companies could afford to run more shops more people would be employed to work in the shops giving a boost to the economy.

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  • The whole retail model is unsustainable, with the 'High Street' becoming increasingly redundant. What is the point for a retailer to be in a supposedly plumb spot in a town centre site but can't make any money? There is no incentive.

    With some retailers being run like a cowboy operation with endless discounting, sales and 'promotions', retailers have forgotten the whole reason why they're in business in the first place - to make money. If they can't make it pay in town then stop and get out.

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