Is there any hope for the high street?
Save our high street: investors should not put their money where their heart is
Some blame business rates. Well, they don’t help. But there is a bigger problem, for traditional retailers it is something of a swear word, it’s eight letters, and the first letter is an ‘i’. And it finishes with three letters that together spell ‘net’. I refer of course, to the internet. An even bigger threat is coming, however.
The only stores that can survive in the long run are the ones that offer a service that you just can’t do online. Eating or drinking for example. There was a time when popping into a cafe was something you did between shops, now it feels like the other way around. Retail therapy has given way to caffeine therapy.
Some stores offer us the chance to eat a morsel of food – maybe this is the big opportunity for Marks and Spencer. Since it combines food and clothes, it can feed us while we shop.
My own personal favourite experience was being offered a full-sized glass of Prosecco whilst looking at clothes that I could not possibly afford in an upmarket boutique. I thought about putting on a disguise and going back for a second glass.
But there are limits – and there is a curious contradiction in the number of stores selling women’s clothes that seem to be aimed solely as people who are size eight or smaller and the stores on either side trying to make us fat with designer coffees and cakes.
Now even John Lewis has hit some kind of buffer. Recently it warned that profits, that’s from both the department stores and Waitrose, will be substantially less than last year.
“It is very important that we feel the jeopardy of what is happening right now,” said Sir Charlie Mayfield, the John Lewis Partnership company chair, “this isn’t a blip, it is a major shift and it has a while to run.”
I have often thought that one of the great misfortunes of retail investors is that the John Lewis shares are not listed (not necessarily a misfortune for society, just for investors who want a stake in a superb company), but when even this company struggles, you know something worrisome is going on.
The company itself said: “It is widely acknowledged that the retail sector is going through a period of generational change and every retailer’s response will be different. For the partnership, the focus is on greater differentiation, not scale.”
It is well known that business rates don’t help. Local government has to raise money somehow of course, although I do worry about the competency level. Near me, there used to be a wonderful cafe, always busy, at a beautiful location, on lease from the local council. The lease was not renewed, and in its place has come a ghastly cafe, part of a wider chain, run by indifferent staff and now, never full. I assume the new cafe’s owners offered more money, but whatever they paid, it can’t be sustainable. In the long run, how can an unpopular cafe make more money for the council than one that was bulging at the seams?
And that’s part of the problem: short-term thinking. Business rates may bring in money at first, but if the result is a devastated high street, longer term, there will be less money.
Recently, Gary Grant, founder of The Entertainer, said that “the Government just hasn’t got it.” He added: “They need to take some responsibility for the high street’s decline.” He continued: “Business rates are out of line now with retail turnover. Business rates are the real killer. Any increase in cost where you have flat and declining turnover is going to put pressure on the bottom line.”
In a recent Twitter poll from The Share Centre, to the question: “As ministers face fresh calls to abolish business rates, do you think the removal of business rates would save the high street, or would this just delay the inevitable?” 45 per cent said they would save the high street, 55 per cent, delay the inevitable.
I am inclined to agree with the 55 per cent but would qualify this: lower business rates in combination with a lot of creativity could save the high street.
New tech threat
There is a new tech threat: virtual reality could transform online shopping – I can foresee the day when we are represented by an avatar, in our likeness, that can even try on clothes. This is a massive threat to traditional shopping.
Technology can also save the high street - augmented reality could perhaps supplement our high street shopping experience with more information, for example.
iBeacons can send messages to us based on our location - quite recently we chose to eat in a specific restaurant because my wife was emailed ‘a two for one offer’ as we passed.
But I hope it can survive. Society would be poorer if the high street was left bare, becoming a residential area. Shopping is also a social experience, it gets us out, creates a vibrant, dynamic place, and helps cement communities.
We are a social species, for me, the single biggest problem posed by technology is that it may remove face to face social interaction from our lives.
It is vital this does not happen.
And for investors
The glib answer is to invest in online retail: Amazon, ASOS and Boohoo for example.
JD Sports, with it’s a somewhat more upmarket approach than Sports Direct turned in good results earlier this year. Primark, part of AB Foods seems to be in the midst of its golden era, Zara and Disney stores all seem to be achieving whilst others fail.
For me the Disney stores really illustrate the point about offering a service you can’t get from home. They are fun places to visit. Contrast that with the toy supermarket that was Toys’R’Us, where was the fun in going there?
And that brings me to the High Street’s best chance of survival. It has to be fun, provide benefits that you couldn’t get sitting in front of a computer. And that requires some kind of collective action - the most profitable stores in the short run may not be the ones that can save the high street.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees