125.As we have noted, a significant structural change has taken place in retail in recent years. In this chapter we consider the consequences for high streets and town centres in terms of store closures, as well as the future of retail; while there will always be a role for retail on our high streets and town centres, this will inevitably be reduced and will require a focus on providing experience and convenience. We have already highlighted some of the most prominent closures and the impact on jobs in earlier chapters.
126.The most visible consequence of the structural transformation in retail is, of course, store closures; with a net loss of 4,402 units in the first half of 2018, most high streets and town centres will have already been affected and, unfortunately, the trend is likely to continue.
127.We know from our experience that the loss of a shop—particularly a long-established ‘anchor’ store—can be crushing for a place; the impact was described to us as “massive” and the empty space that remained a “scar”. The surrounding shops are also affected by the loss of a “pull” into the town centre.
128.William Grimsey, Chair of The Grimsey Review and The Grimsey Review 2, spoke forcefully about the ongoing closures of Marks and Spencer stores:
If you look at the closures on the Marks & Spencer list, they are town-centre-based, most of those buildings were built specifically for Marks & Spencer 70, 80 or 90 years ago. When you drill for oil, you have to restore the environment once you have finished. For a company like Marks & Spencer just to up sticks and leave a gaping big hole in a community and walk away puts into perspective what corporate social responsibility should be. We need to be asking certain questions about how this is able to happen.
129.The retailers we spoke were clear that the decision to close a store was not taken lightly and that their primary responsibility was to their employees. Richard Collyer, Chief Financial Officer at New Look, said it was “never the first choice” and an “incredibly difficult decision”. Tony Ginty of Marks and Spencer said that, after redeploying staff, his company’s second priority was to ensure that the store remained vacant for as little a time as possible, both for financial reasons and for the “look and feel of the town itself”. He described working closely with the local authority on this.
130.During our visit to Stockton and Darlington we were told that Marks and Spencer had chosen to close its stores in the town centres and open a new store nearby out-of-town. When we asked Mr Ginty why, he said:
Do we put stores elsewhere and do they sometimes have an impact upon others? Absolutely, but that is part and parcel of building an estate for the future. If you did not do that, you would end up keeping the estate that you currently have. That, frankly, is guaranteed disaster in the current economic climate that you actually face. It is the same with Warrington. People say, “You have built Gemini”, which actually is not very far from Warrington, but it was absolutely the right commercial decision.
131.However, we heard of cases where stores earmarked for closure had been saved as a result of collaboration between the stakeholders involved. Darlington Council told us how they had worked with Sports Direct Group to keep the House of Fraser in the town centre open, and Katharine Wynne of Debenhams said, with regards to a particular store earmarked for closure: “The local authority and the landlord have got together and put together a regeneration plan […]. They are prepared to invest behind our store in that location to anchor it”. In other instances, creative solutions had been found, for example, converting the upper parts of the House of Fraser store in Bath to residential accommodation to ensure the retail part beneath stayed viable.
132.The closure of a shop, particularly a long-established ‘anchor’ store, can be crushing for the community and blight the wider high street or town in which it is situated. Such effects are particularly stark in smaller towns where large chains often decide to make closures first. We believe that such smaller towns, which lose stores to neighbouring large towns, cities and out-of-town retail parks, are particularly affected yet less well placed to respond in terms of their resources, capacity and their ability to attract redevelopment.
133.Retailers clearly need the flexibility to respond to the significant changes in the industry by closing and restructuring stores and, from what we heard, these decisions are never taken lightly. While a focus on redeploying staff is absolutely correct, we encourage retailers to consider that their corporate social responsibility extends beyond this to helping to find a future for the empty property they have left behind.
134.We believe that retailers considering closing a large long-established ‘anchor’ store should contact the local authority as soon as possible and explore with them, the landlord and the Business Improvement District or place management partnership whether a creative solution can be found for its future. This might include finding a new use for the empty property or putting together a plan to save the store which might require reducing its size or converting it partly to residential accommodation.
As discussed in chapter one, there has been a wave of high street and town centre store closures in recent years. The Local Data Company, which gathers data on “persistent vacancy”, reports that 3.5% of high street units across Great Britain are staying vacant for more than three years, and that there is a “clear north/south divide” with the North East and North West having the largest percentage of long-term vacant units. London Councils described the impact of empty shops on the high street:
[They] are not only a symptom of a struggling high street, they are also a cause. Empty shops can cause a ‘negative feedback loop’, which means they discourage investment, decrease the ‘offer’ on the high street, keep consumers from visiting and contribute to a general sense of decline and neglect.
The reasons why units stay empty are complex and we could not delve deeply into the specifics in this inquiry. It is clear that there is now too much retail space on most of our high streets and town centres compared to demand. But Jonathan Newman of Great Yarmouth Town Centre Partnership, a town particularly affected by vacant units, said that it was also because landlords had not appreciated that the retail environment had changed and were “holding out for the next big retailer to come along”.
A core issue raised by Professor Cathy Parker of the Institute of Place Management concerned the inflexible nature of many properties. She said the fact that “half of the BHS stores are still empty after two years, so that tells you that there is an issue with adaptability”. We note that, as at March 2018, 71% of BHS stores were still empty (102 properties). Wanting to explore how empty properties could be brought back into use, we asked Kevin Frost of Cineworld whether it might be possible to open a cinema in a department store. He told us that “there is a real structural challenge around getting the auditoria right […] It can be done, but it is very expensive. Therein lies the problem”. Richard Roe of Trafford Council said that he was currently considering how to use empty shops to “get community uses into the town centre”. We note that the Government is also working on this issue and has launched the Open Doors Pilot, which will match landlords struggling to find tenants for their empty properties with community groups looking for space. The launch by the Government of a pilot register of empty properties, collated by local authorities, is also welcome.
Another issue raised was the treatment of empty property in terms of business rates. Further, as discussed in chapter seven, the wider financial context in which landlords operate is also relevant. On the one hand, speaking from a landlord’s perspective, Mark Williams of the Hark Group said:
We are penalised when a shop is empty. We are picking up the rates. We are paying a tax for leaving it empty, so we are already contributing and we are doing the best we can in terms of investment, trying to remodel or bring in different uses. We have a big financial interest in trying to do something.
However, Mel Stride, the Financial Secretary to the Treasury, told us that he thought that empty property rates were “slightly perverse” and a “disincentive to the landlord to get [the property] occupied as quickly as possible”. Owners of empty property are afforded a three-month exemption from business rates from the date the property become empty, and the empty property must only be occupied for six weeks before a further three-month exemption can begin.
The Greater London Authority (GLA) and London Councils recommended that empty property relief should be made discretionary, so local authorities could decide how best to apply it according to local circumstances, and should also be supplemented with “retail reoccupation relief”. According to the GLA, reintroducing the retail reoccupation relief scheme, which operated in England in 2014–15 and 2015–16, would provide “a direct incentive for businesses to reoccupy vacant or derelict former retail premises”. As discussed in chapter five, Stockton Council provides a range of business rates-linked incentives for retailers opening in the town centre.
The reasons why some high street properties remain empty for extended periods of time appear to be complex. This is an issue which merits further investigation. We recommend that the Government commission research into why some high street properties remain vacant for long periods of time or have rapid turnover of occupants while some are refilled quite quickly. This should include an assessment of the impact of empty property rates and exploration of other measures which would encourage landlords to find new tenants, such as retail reoccupation relief. The Government should report its findings to us by October 2019.
135.With online shopping only set to grow in the future, it is clear to us that, to compete and be successful, high street retail needed to carve out a separate role, focusing on providing “experience” and “convenience”. We envisage that this would be complemented by changes to the public realm and the ‘place branding’ activities discussed in chapters two and five which would improve the wider area.
136.We heard that there were two main ways that retailers could create an experience, through a unique and interesting offer in store and making an asset of their physical retail space and staff by creating opportunities to interact with customers that could not be replicated online. For example, Clayton Hirst of the John Lewis Partnership said that, in addition to trialling new services across 15 stores, one of which was personal styling, they had trained 300 of their partners in theatre skills, recognising that the “human element when you go into a store really helps to drive sales and drive the experience for our customers”. Debenhams were making their stores as “strong and attractive [….] as they possible can be”, including making beauty a focus of their new Watford store and alongside this providing advice, consultations and treatments.
137.We believe that department stores are well-placed to offer this kind of expanded experience. Despite the financial difficulties faced by some, Mike Ashley of Sports Direct Group told us that the “concept of the department store was actually correct” and that they needed to “evolve”. Clayton Hirst of the John Lewis Partnership told us that his company was “the process of trying to reinvent the department store for this century”.
138.Lakeland Leathers, a much smaller, independent chain store, was also moving into personal shopping and was planning fashion shows in store broadcast via Facebook Live and Instagram Live and linked to their online offer. However, as Martin Foster, the Chief Executive, noted, “we need a level of profitability to be able to invest in those [opportunities] and access them”. We note the evidence we heard that independent retailers were particularly able to adjust to the market, be “nimble and agile” with their stock and “add a character to any high street, any town centre”. For this reason, Stockton Council is encouraging growth of independent retail in the town centre with a range of support schemes and business rates discounts.
139.We also heard that tailoring the store’s offer to the characteristics and needs of the local area was an important part of providing an experience. While often inherent to the business model of an independent retailer, we heard that this was often neglected by larger chain stores. Professor Cathy Parker of the Institute of Place Management explained:
We have had a very concentrated retail sector in this country, which means we have a lot of multiple retailers in most of our locations. They are controlled by head office as to the merchandise they offer, how their store fronts look and what type of retailers they are. They are not very good at adapting locally. It goes back to understanding your local data and your local catchment, and then making sure that your offer is absolutely right.
140.We were told that high street retailers also needed to try and match the convenience offered by online shopping. Opening hours are clearly key to this; Mike Ashley of Sports Direct Group said:
Say a store used to open at 9 o’clock. There are no customers on the high street at 9 o’clock anymore. Say stores need to open at 12 o’clock now. That person’s contract would have to move. Maybe shoppers want to come in and pick up their internet parcels after work, so whereas a store used to shut at 6 o’clock or 5.30, maybe it needs to stay open later.
Responses to our questioning on this suggested that, while opening hours are more flexible than they used to be, retailers need to explore this opportunity more fully. We heard that Stockton Council were having to encourage local retailers to stay open late while events were on in the town centre which could potentially bring in customers. Jake Berry, the MHCLG Minister, told us that retailers should base these decisions on customer data and this was “the sort of new expertise that we could see embedded in the task force”.
141.Click and collect has a dual role of providing convenience for the shopper, namely avoiding the irritation of not being in to receive a delivery, while increasing footfall on the high street. Clayton Hirst of the John Lewis Partnership, explained:
More than 50% of online sales through John Lewis & Partners is actually collected in one of our estates, which is either one of the John Lewis stores or one of the Waitrose & Partners stores. We find that our customers really like that service because there is a convenience of going into a Waitrose store, picking up your groceries and collecting the goods you have bought online.
We heard that one in three online sales for a multichannel retailer uses click and collect and were told that “if people have that option, they will go and use it”. We note that large online-only retailers often provide customers with a range of click and click locations, which in Amazon’s case include Amazon Lockers. Kate Nicholls of UKHospitality said that, in the future, there would be “more hybrid operations” suggesting, for example, that a hotel could provide space for picking up parcels out of hours. When we asked representatives of Fuller’s and Nando’s whether they might consider accommodating this in their pubs and restaurants, they were not keen.
142.Yet, click and collect is a key way of supporting the high street. Andy Mulcahy of IMRG described its potential:
If you think of a small high street where you have 30 shops or something, it is very difficult for that to be competitive today because it does not have the choice or availability. If you could engineer a scenario where anybody living anywhere could get access to anything, that would be the kind of high street that makes quite a lot of sense. That infrastructure just is not there at the moment, but there are a lot of empty shops.
He suggested that empty shops could be used as “inventory hubs” where people could collect their parcels and try on or test purchases at the same time.
143.Hive is example of an online retailer whose business model has been developed to support independent high street book shops via click and collect. Interested to hear more, we invited Julie Howkins, eCommerce Development Manager of Hive, to give evidence. She explained that, in addition to giving book shops a percentage of sales made on their website:
One of Hive’s USPs is the fact that we offer the option of free collection in store, which is driving footfall to independent bookshops. We have a small network, compared to Amazon, of just under 300 bookshops. The customer can choose to collect their order from a bookshop, increasing footfall to the store. The bookshops quite like the fact they are engaging with customers they would not normally have access to.
144.Retail will always be a part of high streets and town centres in the future. But to remain competitive, attract custom and add to the vibrancy of a place, we encourage retailers to consider how they could update their practices.
145.Retailers should make an asset of their physical retail space and their staff by creating opportunities to interact with customers that cannot be found online. In addition to being well-stocked with interesting products, this could include providing personal shopping services, advice and consultations, using social media and investing in staff training and the store itself. Of course, we recognise that this is only possible if retailers have some headroom to invest which is why we have recommended that business rates for high street retailers be reduced.
146.In many places, store opening hours do not reflect the fact that many people need and want to be able to shop at the end of the day after they have left work. If they cannot shop on the high street at their convenience, they will shop online or at an out-of-town retail centre instead. Retailers should conduct research with shoppers to find out whether their opening hours are meeting people’s needs and adjust them in accordance with the results on a local, shop-by-shop basis.
147.In addition, we encourage more retailers to offer and host click and collect, providing their customers with convenience while supporting high streets and town centres through increased footfall. We were attracted to the idea of turning empty shops into an ‘inventory hubs’ where people could collect parcels at their convenience and we encourage local stakeholders looking for new uses for such properties to consider whether this might be appropriate for their local area.
274 Local Data Company, , November 2018
275 London Councils ()
282 Greater London Authority/Mayor of London ()
Published: 21 February 2019