New report forecasts one in five uk stores will close by 2018
A new report published by the Centre for Retail Research looks at how UK retailing will have changed by 2018. The ‘Retail Futures 2018′ report forecasts that by 2018:
Total store numbers will fall by 22%, from 281,930 today to 220,000 in 2018
Job losses could be around 316,000 compared to today
The share of online retail sales will rise from 12.7% (2012) to 21.5% by 2018 or the end of the decade
The report also found that a further 164 major or medium-sized companies could go into administration, involving the loss of 22,600 stores and 140,000 employees. It said many of these companies will survive but at the cost of closing more than half their stores.
The report said that in spite of the Portas Pilots, the high street will continue to suffer, with around 41% of town centres set to lose 27,638 stores in the next five years.
It said key catalysts for the looming retail crisis include:
Consumer spending has increased by 12% since 2006 outstripped by retail operating costs (including rates) which have risen by 20% – it will be several more years until the UK returns to previous levels of growth: in fact GDP/head has not yet returned to the level it was in 2008
Customers are shunning the high street – their share of consumer spending has declined from 50% in 2000 to a predicted 40.2% next year
As fewer shop in stores, online retail is set to account for 21.5% of total retail sales by 2018 from 12.7% today, the highest online retail share in the world
The report says retailers will either make clear strategic decisions that permit online retail to coexist with other retail channels in a multichannel world allowing bricks and mortar retailers to transform themselves, or, by avoiding making these decisions, multiple retailers will disappear or be so mortally wounded that a large minority of business categories become dominated purely online retailers.
Across the country the situation varies drastically as disadvantaged retail pockets become more prominent. More towns will need some reduction of retail space because of the fall in the demand for shops. However Retail Futures 2018 predicts that more than a third of town centres (41% or 153 stores) could experience a rapid decline by 2018 if no action is taken. Just over a fifth (78 or 21%) of towns are declining in retail terms and 75 are stable but under pressure. It said the retail centres most vulnerable are those near low-income populations located on secondary or tertiary shopping areas.
The number of high street stores is expected to fall by 19.9%, but an even greater impact will be felt by neighbourhood stores. These will decline by 34,587 (-26.2%) as a result of the declining profitability of neighbourhood shopping in many areas, the unwillingness of multiple retailers to continue operating in small neighbourhoods and the move towards perceived lower prices and better availability of stores in town centres, retail parks and internet shopping.
But it is not only the high street that is affected. Major retailers like Tesco, Wickes, ASDA and B&Q have announced dramatic reductions in opening large new stores (though convenience is still massively important) and all have plans to subdivide giant stores, leasing space to other retailers.
The High Street of the Future
High streets are an essential part of town centres, creating employment and vitality; the best of them bring tourists and shoppers in – developing services, leisure and entertainment markets as well as retailing.
Retail Futures 2018 argues that high streets are threatened by the current changes in retail structures and shows that the town centres of 153 UK towns (41% of the total) will experience a rapid decline as a result of changing retail patterns and need to shrink to survive. Some smaller and less successful secondary and tertiary sites may disappear almost completely.
Retail Futures 2018 recommends that a pump-priming fund of £320m is required to start redeveloping these problem town centres to turn failing and empty shops into good residential accommodation, create more service/entertainment/leisure outlets, and/or provide offices, doctor’s surgeries, classrooms/meeting rooms or other facilities for which there may be a local demand.