Retail sector: Bleak Winter for retail or time to restructure?
Bleak winter for retail or time to restructure?
- The High Street will survive if it adapts to change -
An increasing body of research shows that UK consumers already consider themselves to be multi-channel shoppers and expect retailers to be the same. So if the High Street is to survive the current economic upheaval it needs to adapt to this change or risk vanishing forever, according to restructuring experts, MCR, a Duff & Phelps business.
Phil Duffy, Partner, MCR, stated: "UK retail sales rose 0.6% in October from the month before, according to the latest data from the Office for National Statistics (ONS). Analysts had expected sales to fall, but a spate of pre-Christmas sales and promotions helped to lure shoppers, with prices down 0.4% in the month. But this is not the whole picture as we don't have real time information about the margins being achieved,"
"The Local Data Company has found that 14.6% of retail premises in the UK are now vacant, indicating that around 50,000 high street units are empty. The Javelin Group has predicted that if current trends continue, a quarter of all non-food retail outlets in the UK could be vacant by 2020. The impact on jobs, landlords and suppliers to the sector such as shop fitters, could not be starker," he continued.
"And yet if you look at British shopping habits then the picture changes. In a recent study by Sterling Commerce 80% of consumers stated that they wanted a choice of shopping - in-store, by telephone and online. This has been backed up by a study from ComStore which found that 97% of consumers now expect a seamless shopping experience across online and offline channels,"
Phil Duffy continued: "The message is therefore clear: if the High Street is to survive then the sector needs to address the changing habits of the market and adopt a ‘bricks and clicks' business model. Today's consumer wants the flexibility this affords and retailers need to address this head on."
"Another major trend is the rise of what we would term ‘destination shopping centres' and again this is going to affect not only shopping habits but retainers as well. Over the past decade the rise of the out-of-town shopping centre has been almost unstoppable and in many cases this has led to the rise of retail citadels such as the Trafford Centre in Manchester or even Westfield in West and now East London. Those retailers that focus their energies in these hot spots are going to survive and arguably survive well in the current economy.
"There is no doubt that these destination shopping centres have affected historic High Streets, but their growth is now being limited. Central and local government is keen to maintain town centres and there has been a marked increase in legislation to discourage out-of-town development and encourage investment in traditional shopping locations. Indeed if one looks to Manchester the Trafford Centre has been seen as a vital element in regeneration," he continued.
"So I would argue that the UK retail sector is far from dead and buried. It is in fact in a period of incredible change. Those retailers that keep their nerve, focus on adapting to changing buying habits and adapt, will be the ones that survive the current economic challenges. For government - both local and national - the temptation to simply develop a new policy document must be resisted. Let the market adjust and put the consumer in the driving seat and the sector will rebound," he concluded.
About Duff & Phelps
As a leading global provider of financial advisory and investment banking services, Duff & Phelps balances analytical skills, deep market insight and independence to help clients make sound decisions. The firm provides expertise in the areas of valuation, transactions, financial restructuring, alternative assets, disputes and taxation, with more than 1,000 employees serving clients from offices in North America, Europe and Asia. Investment banking services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. M&A Advisory services in the United Kingdom and Germany are provided by Duff & Phelps Securities Ltd. Duff & Phelps Securities Ltd. is authorized and regulated by the Financial Services Authority. Investment banking services in France are provided by Duff & Phelps SAS. For more information, visit http://www.duffandphelps.com/. (NYSE: DUF)
About MCR
MCR was formed in April 2001 to offer turnaround, restructuring and insolvency services of outstanding quality to banks, lenders, business owners and individuals in the mid-market sector. It aims to provide the most practicable ways to resolve issues affecting business performance. The firm has 19 partners and directors who practice an ethos of high-level involvement to ensure that each assignment capitalises upon the expertise and knowledge of the whole team. MCR regularly handles significant projects across a range of sectors and has been involved in a number of high-profile cases. MCR is increasingly being asked to restructure businesses and find turnaround solutions to help companies avoid formal insolvency. Sectors include property, retail, financial services, manufacturing, printing, recruitment, hotels, leisure, automotive, telecommunications, music, entertainment and construction.
