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Up to 40% of high street shops 'could close over next five years'

Four out of 10 shops will have to shut in the next five years as consumers turn their backs on traditional stores in favour of online shopping, according to a Deloitte report which claims that thousands of shops are likely to face closure.

To remain competitive, retailers may have to reduce their property portfolios by 30–40% in the next five years and adapt what remains to meet the changing demands of consumers, Deloitte said. The growing trend in the US for large warehouse-style retail outlets to have free in-store Wi-Fi to help customers shop online is expected to spread around the world. Tesco has already announced plans for such facilities in its UK stores.

"The majority of UK retailers have simply got too many stores," said Silvia Rindone, a director in the retail consulting practice at Deloitte and author of the Store of the Future report. Total floor space has dropped in recent years, she noted, and this will continue as consumers shop more on the internet, with online sales forecast to reach £43bn by 2015, accounting for 14% of all retail sales. Some 22% of people did not buy their last item of clothing or accessories in store, and only 9% of customers want to see the full product range in shops.

Philip Dorgan, a retail analyst at Panmure Gordon, agreed that "most" retailers have too many shops, in particular [Argos owner] Home Retail and Game, which is teetering on the brink of collapse. "Sales through mobile devices are going through the roof, from a low base," he added.

David Cameron is so concerned about the decline of the high street that he commissioned a report from retail guru Mary Portas who recommended 28 measures including "town teams" to manage shopping areas and a national market day.

But attempts at improvement face an uphill battle. Electrical chain Dixons is reducing its UK stores from 650 to 450 while Carpetright and Halfords are also shutting shops. High rents are a problem: Sir Philip Green, whose fashion empire spans Topshop, Burton, Miss Selfridge and Dorothy Perkins, has said he may axe 260 outlets in the next three years, a 10th of the total, if he cannot renegotiate his leases.

The days of rapid expansion, hypermarkets and warehouse-style stores seem to be over, with even Tesco indicating it would not open any more of its huge Extra stores. When the company, Britain's biggest retailer, delivered its shock profit warning in January, Tesco boss Phil Clarke said: "Do you need to build large hypermarkets in the UK when the internet is taking so much growth in electricals, in clothing, in general merchandise?"

Music and film retailers have seen the most dramatic shift, with more than half of CDs and DVDs now sold online, excluding downloads, according to retail consultancy Verdict Research. Game is not the only retailer in trouble: HMV plans 60 store closures while others such as Zavvi and Borders have gone bust.

Some retailers have managed to keep up with technology. Burberry, for example, turns its London store into an audiovisual bonanza with big screens and iPads at the beginning of each season. Ocado and Tesco have developed smartphone apps enabling customers to order groceries while on the move. Big department stores are offering "click and collect" where shoppers order online and pick up from a store of their choice. House of Fraser, Debenhams and John Lewis are also trialling smaller stores with internet kiosks where customers order for home delivery. In South Korea, Tesco has created a virtual store in the subway where commuters can order their groceries from a virtual wall.

"The high street will become full of coffee shops, building societies, kiosks and hubs to pick up stuff," said Dorgan. "It's a different place from 10 years ago and I imagine in 10 years' time it will be a different place again."

Source : Julia Kollewe – The Guardian

20 March 2012
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