One in nine high street shops now stand empty as a year of battling for survival awaits further big name brands
Jessops, which this week became the latest casualty of the economic downturn, is unlikely to be the last household-name retailer to struggle for survival this year as experts warn that 2013 will prove even harder on Britain’s atrophying high streets than 2012.
The camera chain’s fall into administration follows the failure last year of a string of big names including Barratts, Peacocks, Game, Clinton Cards, Comet, Allders and JJB Sports, and the demise in 2009 of the once-great Woolworths chain.
With British Retail Consortium (BRC) figures showing that one in nine high street shops stand empty, there are fears that specialist retailers such as Jessops are facing unprecedented challenges as they try to contend with online competitors and increasingly squeezed consumers.
Jessops’ mistake was investing too heavily in the digital camera boom as smartphones took off and internet retail blossomed, according to analysts.
“Jessops expanded on the back of that wave and the problem is that if you expand on the back of a bubble, if that bubble ever bursts and you’re a specialist, single-product retailer, you’re very exposed,” said Neil Saunders, a retail analyst at Conlumino.
“That’s exactly what happened with Jessops: they struggled over quite a long period of time and they had a lot of debt as well, and eventually I think the business was just seen as being quite unsustainable.”
Despite trying to rebalance itself by offering other products and services, said Saunders, Jessops never quite managed it. “We’ve seen this pattern replicated many times before and it’s been shown to be true in music and video – especially where the product is becoming digitalised – and it is true in books to a lesser extent.”
Independent retail analyst Nick Bubb put Jessops’ failure in still starker terms. “If people are using smartphones and tablets to email photos around on social media sites, then who needs a specialist camera? Professional photographers can shop online for that kind of thing.” Specialist retailers, whatever their products, had to be wary of “their niche becoming a tomb”, he said.
Experts are downbeat about the average high street’s prospects over the next 12 months. Saunders predicted a lot more gaps as the high street struggles with a falling number of visitors with a decreasing amount of money in their pockets. He also believes that some specialist music and video retailers will follow Jessops into administration. HMV, which reported a half-year loss of £37m in December, on Thursday announced a month-long sales promotion which will see prices reduced by 25%.
Bubb added: “I think we’ll see a number of players consolidating store numbers, and that bodes very badly for secondary and tertiary high streets or the less prosperous locations, and I think we will see high streets struggling to attract footfall.”
He agreed that while the big shopping-cum-entertainment centres such as Westfield, Bluewater and Lakeside would continue to do well because that is where all the consumers and retailers want to be, more modest high streets would suffer.
“If you’re talking about Margate high street or Barnsley high street, they will continue to be full of betting shops and discount shops and pound shops and charity shops.”
However, both analysts pointed out that some big-name players, including John Lewis, House of Fraser and Debenhams, had managed to weather the economic storm and did well over Christmas by successfully integrating their physical and online operations.
Saunders said: “It’s very clear that where you do tie the two things together, they do work. What retailers need to do is not to see their operations as about stores and online but to see it as a seamless whole and then decide what they need to do to bring their products to market: how many stores they need and how the internet fits in with that.”
Richard Dodd, head of media and campaigns for the BRC, also counselled against treating the internet as the enemy of the high street shop. Were it not for strong online sales in December, he said, there would have been no positive spending growth across the retail sector as a whole.
“When you strip out the online element from overall retail sales, it’s clear that store sales in December were actually down on 12 months earlier,” he said. “It’s wrong to start thinking that [internet retail] is the prime cause of the difficulty: it’s actually an opportunity and route to salvation.”
Dodd feels the government could take bolder steps to support the ailing high street: the BRC wants the coalition to help retailers by announcing a freeze on business rates in April.
Like his fellow analysts, Richard Hyman, a retail consultant at Patel Miller, has no doubt that 2013 will be a bleaker year for the British high street than 2012 with more shops set to close.
“By the end of this year, there’ll be quite a few more names that won’t be there any more because there are too many mouths to feed and too many companies that are not really fit for purpose,” he said.
Hyman believes high street retailers have been overly reliant on outdated business and management models. He warned that the slow deaths of high street giants will continue until the entire sector takes the time to re-examine the relationship between supplier, retailer and consumer.
“This is the Pandora’s box that the internet has opened for retailing. I don’t for one moment think that retailing’s going to disappear, but I do think that its future will be quite different and that some really fundamental revisiting of the model needs to take place to establish scalable and sustainable businesses.”