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Consumer behaviour favours thriving leisure sector as high street continues to evolve

Posted: 15/04/19 by PwC LLP

  • Milton Keynes sees

    largest fall in the number of shops over five years with a net loss of -23


  • Banks, and charity and mobile phone shops are hardest hit by shop closures
  • Vaping stores and tobacconists and booksellers on the rise
  • Towns of Bletchley, Stony Stratford and Wolverton are withstanding high street challenges
  • High

    street still has a part to play, as it secures a sustainable future to

    support online and leisure activity, says expert

High streets across Milton Keynes have seen the largest fall in the number of shops for the last five years with a net loss of -23 stores in 2018 as only 13 shops opened, compared to 36 closures (2017 net loss: -7 stores), according to PwC research compiled by the Local Data Company (LDC).

The net loss of shops on high streets, retail parks and shopping centres was at the highest for five years at -23, growing from; no losses in 2014, -11 in 2015, -2 in 2016 and -7 in 2017.

The analysis tracked 11,375 outlets in the South East operated by multiple retailers* in 94 town centres across the region.

Milton Keynes saw a net loss of -23 stores, with 36 closures and 13 openings. Surrounding towns fared better with Bletchley seeing a net gain of three stores with five openings and two closures
and Stony Stratford had a net gain of one store with three openings and two closures, and Wolverton seeing no closures or openings.

Milton Keynes saw some parts of the high street thriving, with vaping stores and tobacconists and booksellers, as well as cake makers, decorators and suppliers, convenience stores and ice cream parlors opening a number of new premises across the region. Whereas there was a fall in the number of banks and financial institutions, charity shops and mobile phone shops, reflecting the rising customer demand for online and apps, and in-home leisure.

Andy Lyon, retail and consumer markets leader for PwC in the Midlands, said: “It’s clear that 2018 was a turbulent year for retailers. Coupled with the growth in online commerce and high occupancy costs impacted by business rates, retailers are facing some of the biggest challenges to hit the high street as we see closures hit record levels.

“There is still an important role for the high street to play, as it secures a sustainable future to support online and leisure activity. We are seeing the high street evolve into an experiential destination, be it through leisure experiences, or retailers restructuring their physical space to support online activity by showcasing products, and attracting footfall through parcel collection and returns facilitation. Key to this is to look at not what is failing but what is thriving through consumer demand and how retailers are making smart changes.

“Whilst Milton Keynes continues to be a popular destination for culture, arts and entertainment, the high street is suffering from the impact of online shopping, increasing costs and subdued consumer spending. Centre:MK is set to become home to one of the UK’s largest Primark stores which will bring new life to the former BHS store. This key investment in MK is testament to the attractiveness of the shopping centre to retailers and will draw much footfall to that area, and indeed visitors into the town.

“It is reassuring to see the local high streets of smaller towns, such as Bletchley and Stony Stratford, are doing well in the face of a challenging retail environment.”

Record loss for UK high streets

A record net 2,481 stores disappeared from Great Britain’s top 500 high streets in 2018. In total, 3,372 shops opened, compared to 5,853 closures. (2017 net loss: -1,772 stores), according to PwC research compiled by the Local Data Company (LDC).

The number of store openings by multiple retailers* on Great Britain’s top 500 high streets has dropped by 17.4% year on year with the current rate of openings at nine stores per day. This also represents a 44% decrease from the 16 stores per day opening in 2013.

Relative to 2017, the rate of store closures in 2018 remained at 16 stores a day. However, the shortfall between openings and closures reached its highest level since the beginning of the decade, as withdrawals from the high street were further dented by a historic low number of store openings.

The analysis also observed a slowdown in leisure, in particular restaurants and pubs, which posted a net loss of 506 outlets, reversing three years of consecutive growth since 2015. Market saturation, cost challenges, and a shift in consumer preferences towards in-home leisure have exacerbated the impact on the sector, not only leading to closures but also discouraging new openings.

Looking at the first quarter of 2019, LDC data finds that closure rates remain high as 1,358 outlets alongside 849 openings. This is a direct consequence of CVA’s, store downsizing and
administrations announced in 2018 feeding through across GB.

Zelf Hussain, retail restructuring partner at PwC, said: “Several national chains weathered company voluntary arrangements or administrations as retailers toiled in the tough climate of 2018. Retail companies looking to survive let alone flourish in 2019 face an uphill battle.

“We have already seen several casualties in 2019 and there will undoubtedly be more, most likely in all categories except for groceries. Those retailers who will give themselves the best chance of survival must focus on having the relevant proposition, and the investments needed to deliver this proposition; the optimal mix of channels and business portfolio; flexible leases.

“Additionally, we believe CVAs are not the answer in isolation. Companies need solutions that fully address customer needs, represent sustainable cost savings and, if needed new money investment to bridge the lag between the cost of a restructuring and long-term performance improvements.”

Across the regions and nations…

Greater London saw the largest number of net closures across all the regions, with fashion retailers closing the most in the capital (-79 units). Scotland was the only region to see a drop in its net closures, dropping from -148 in 2017 to -119 in 2018. Wales was the best performing region, posting the lowest overall net decrease in chains of -59.

Lucy Stainton, Senior Relationship Manager, Head of Retail and Strategic Partnerships at The Local Data Company, said: “A key trend from this latest analysis is the increased loss in leisure units across the top 500 towns. We identified the start of this decline in H2 last year and sadly this has worsened due to an incredibly competitive marketplace and rising operating costs. We anticipate further losses in the leisure sector as brands which fail to entice customers to spend across multiple trading periods -breakfast, lunch and evening- close stores for good.

“Also key to note is that the two regions that were previously less susceptible to market challenges, Greater London and the South East, are now the two that have been hit the hardest by store closures.

“However, there are still green shoots breathing life into this sector with brands trialling new grab-and-go concepts. It will be increasingly important for leisure operators to be agile to keep their offer relevant. Bricks and mortar has a strong future- but not as we know it. Stores and shopping destinations will continue evolving to better serve consumer demand, integrating as part of an online channel.”

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