Already under enormous pressure before the arrival of the coronavirus pandemic, the high street has taken another battering. What will it look like as the crisis subsides?
The forced closure of non-essential shops in late March has heaped further misery on struggling high streets.
Over the past three months, Cath Kidston, Oasis Warehouse, Monsoon Accessorize and Quiz have all fallen into administration while many retailers, from Debenhams to Clarks to Arcadia, will not reopen some stores. Dixons Carphone shuttered all 531 stores during the lockdown.
These closures further batter a high street that has suffered years of dwindling footfall, spiralling rents and customers migrating to online shopping.
As stores reopen, many retailers have been banking on pent-up consumer desire to provide some respite from months of pain.
“People aren’t buying clothes if they don’t go out. Once we can leave the home more, the purchasing of fashion will tick up”
Diane Wehrle, Springboard
Queues of thousands of shoppers, snaking an estimated five miles around the car park of the Croydon Ikea superstore when it reopened on June 1, made headline news and may have given a lift for some retailers. But will others see the same pent-up demand?
Diane Wehrle, marketing and insights director at Springboard, does not expect footfall to return to pre-coronavirus levels quickly.
“We’re currently sitting at -70% year on year. If we got to -40% or even -30% in the weeks and months after lockdown, that’d be a good uplift,” she says.
While Wehrle thinks some sectors, such as home and DIY and toys, will fare well, she believes demand will be particularly weak in fashion. She cites the lack of demand for clothing online – which dropped 9.9% last month despite overall online sales jumping 32.7%, according to IMRG Capgemini’s Online Retail Index – as an indicator of a lack of demand.
“The online numbers demonstrate people aren’t buying clothes if they don’t go out. Once we can start leaving the home more, the purchasing of fashion will tick up,” Wehrle says.
Knight Frank head of retail Stephen Springham says some fashion retailers are predicting that sales will not return to pre-coronavirus levels until the second half of 2021.
Safety concerns
The two-metre social distancing rule, along with fears around safety, will impact footfall for retailers.
A study by EY found that 70% of consumers feel uncomfortable going shopping right now, with 45% saying this is unlikely to change for the next year. Almost two-thirds of respondents said they would shop less as a result.
In a bid to make consumers feel more comfortable ahead of reopening, retailers across the spectrum have been implementing new measures to make the best of a bad situation.
70% of consumers feel uncomfortable going shopping right now
EY Future Consumer Index
Card Factory chief executive Karen Hubbard says the retailer will introduce “hosts” at the doors of stores to prevent overcrowding, as well as hand sanitisers and sneeze-screens at checkouts. Some fixtures have also been removed to allow for effective one-way systems to be put in place.
However, Card Factory will open just 10% of its estate from Monday as it takes a “test-and-learn approach” to understand if the measures it has introduced work and whether customers feel safe shopping in its stores.
Hubbard is unsure of how the reopened stores will fare. ”We can sustain some footfall decline if that’s what happens, but we will just have to wait and see where the customer wants to shop, how they want to shop and how we can help them satisfy that mission.”
Into the voids
Meanwhile, coronavirus has accelerated the consumer shift to online shopping. With non-essential stores closed over the past few months, online has been the only way to buy many products.
New research by Retail Economics and Squire Patton Boggs shows that 45% of consumers bought items online that they would normally have bought in store for the first time during the pandemic, and chief executive Richard Lim says he expects some of that behaviour to stick, even as the lockdown eases.
This online step change, combined with weak ongoing consumer demand and the challenged finances of many retail businesses, will undoubtedly lead to an increase in store vacancies.
The most recent BRC-Local Data Company (LDC) Vacancy Monitor published in early May, for the quarter to the end of March 2020, showed that vacancy rates across all retail destinations were hovering at 12.2% – and this was before coronavirus hit.
As BRC chief executive Helen Dickinson warned at the time: “It is likely that some stores may not be able to reopen after the lockdown is lifted, and the vacancy rate may rise sharply in the future as a result.”
One senior property expert predicts “this will be the worst year for store closures and business failures in history”.
A spokeswoman from LDC says that more than 9,000 stores were lost across all retail destinations in 2019, with 4,669 of those being on high streets.
Despite 2019 being “the worst year” for store closures since at least 2012, she says, “I think we can say with some certainty that it will be much greater this year.”
“A large proportion of retailers will be looking to open around a third of their estates now, another third in the run-up to Christmas and then hold back the final third and make a call after Christmas”
Paul Martin, KPMG
KPMG’s Paul Martin agrees that more closures are likely: “We thought that a reduction in physical retail space by that 25% number would happen by 2025. I think, due to the effects of the virus, it will happen sooner,” he says. “By 2023 now I think we’ll have reached that reduction.”
Martin believes the majority of retailers eyeing phased reopenings will not only be drawing learnings on how to operate post-coronavirus, but also on which stores they will need in the new normal and which they don’t.
“A large proportion of retailers I’ve spoken to will be looking to open around a third of their estates now, another third in the run-up to Christmas and then hold back the final third and make a call after Christmas. Some may never open that last third again.”
This strain on stores has also once again exposed the fractious relationship between occupiers and landlords.
With many retailers looking to move to turnover-based rents or flatly refusing to pay rent at all, both Martin and Springham predict further vacancies. This is particularly the case in urban city centres and big shopping malls, as experts predict local high streets at least will see a sustained boost as lockdown begins to unwind.
Local heroes
Springboard’s footfall figures for May showed that, while city-centre footfall declined by 88%, local high streets proved to be much more resilient, falling just 44% by comparison. While this is heavily skewed by store closures and people working from home, safety concerns are also at play.
According to the Retail Economics/Squire Patton Boggs survey, more than a third of consumers say they do not feel comfortable shopping in any physical locations as the lockdown restrictions begin to ease but of those that are comfortable, 29% were happy to shop at the local high street, which was twice as popular as retail parks (14%) – with shopping malls in town centres the least desirable places to visit.
Wehrle suggests these shopping trends may continue and could lead to a new destination hierarchy with retail parks being the most popular location for stores, followed by local high streets and then city-centre high streets, with shopping centres at the bottom.
“The destinations that may do the best out of all this longer-term are the quiet smaller town centres and more suburban high streets – the areas, ironically, that were most challenged pre-coronavirus.
“People are going to continue to stay local, even as stores more widely open up. They’re not going to want to travel and they will want to support local retailers, where they can.”
A number of retailers have already begun looking to capitalise on cheap retail property in more local locations, such as home and DIY giant Dunelm.
The retailer opened its new ‘Edit’ fascia on Crawley High Street earlier this month. The store is more locally focused and only stocks products that are popular in the Crawley area – an idea the retailer will look to replicate in different neighbourhoods.
Mike Coupe, who retired as Sainsbury’s boss last month, notes that customers have been shopping more at local supermarkets during the lockdown, which has come at a cost for the grocer’s once-thriving network of inner-city convenience stores.
He suggests that grocers might have to “reorientate [their] convenience business in a different direction because some of the ones near to where people live are a lot more buoyant”.
“The mindset of people travelling into town or to a big shopping centre for a day out of shopping will take a long time to come back”
Stephen Springham, Knight Frank
But where does this leave major high streets and city centres?
In the short term, there will inevitably be more empty units and a distinctly quieter feel.
Springham says: “The mindset of people travelling into town or to a big shopping centre for a day out of shopping will take a long time to come back.”
Landlords will be desperately searching for new tenants to plug the gaps and retail is likely to play a less integral part of the high street. With the restaurant sector in an equally precarious position, food and beverage is unlikely to fill the void.
But other sectors and businesses are still searching for space. PureGym chief executive Humphrey Cobbold says he still wants to push ahead with his plan to open new gyms on the high street.
”When the dust settles on this, we’re still looking to take 3 million square feet in the UK. We’ll still be calling on government and councils to allow us more freedom to come into high streets and help regenerate them,” he says.
”Currently, it’s so difficult to get planning conversion from A1 retail use to D2 leisure use. There’s clearly going to be an excess of commercial property after this. We just hope we don’t have to jump through endless planning hoops in order to make use of that property.”
It’s not just gyms that will take on space once filled by retailers. Martin believes we will see a variety of consumer-focused services move on to the high street, such as health centres and education and community buildings.
However, this reconfiguration of space will take some time, and high streets up and down the country could be far less vibrant places in the interim.
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