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Bricks-to-clicks evolution accelerates as online retailers swallow high street brands

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Two of Britain’s most iconic brands have been saved by online retailers but the deals could spell trouble for the high street, accounting experts have warned.

3rd Feb 2021
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Clothing retailer Boohoo has acquired all of the intellectual property assets of Debenhams, including customer data and selected contracts, for £55m. The 243-year-old department store filed for administration twice in 12 months, the second time during the coronavirus pandemic. 

Separately, Asos will pay £295m for four brands from collapsed retail group Arcadia - Topshop, Topman, Miss Selfridge and HIIT. However, the deal does not include the physical shops. Sir Philip Green’s failed empire entered administration in November last year, putting 13,000 jobs across about 450 stores at risk. 

“The brand-only nature of this deal, forcing the closure of many thousands of stores across the country, is symbolic of the major transformation the high street is undergoing,” said Roberto Lobue, partner and retail sector specialist at accountancy firm Menzies LLP.

“With the 'bricks-to-clicks evolution' gaining momentum, high street retailers must adapt to survive, remodelling their businesses to focus more on online sales or else pivoting to take advantage of rising footfall in areas that can be easily reached by home workers,” he said.

“The disappearance of major stores creates a vacuum, which will prove damaging to other high street fashion stores,” said Mark Halstead director of Red Flag Alert, the UK’s leading insolvency scorecard. “The likes of Topshop are crowd-pullers and when they shut, they suck footfall out of city centres.” 

This takes away passing trade that high streets rely on, Halstead said, and isn’t just damaging in terms of loss of sales; it also makes it more difficult for other shops to achieve optimal selling prices and accelerates the depreciation of stock value. 

“The latter is a massive risk for fashion retailers, where sales periods are so reliant on the seasons,” he said.

Crowded markets

The onset of coronavirus only brought about changes that were already occurring in the retail environment, experts told AccountingWEB.

“The pandemic has accelerated the move from the high street to online with the big winners of the past 12 months the likes of ASOS and Boohoo,” said Julie Palmer, partner at Begbies Traynor. “We could see that online retailers are able to choose the best parts of the high street and give their customers even better offerings as they seek to stay ahead in a market that is moving at a rapid pace.”

Online retailers must not rest on their laurels and will need to continue upgrading their processes and their products to stand out in an increasingly crowded market, Palmer said.

“Has the virus just speeded up an inevitability?” added Peter Bracey, managing director, Bracey’s Accountants. “More working from home, more shops being closed. Throughout the ages there has been a natural transition of workforce; 20 years ago, who would have thought that there would be a whole industry and many thousands of people employed within social media, for example?”

Although high street jobs will go, the economy will require more pickers, packers and delivery drivers, he said.

New uses for empty shops

“The real opportunity is what can be done with those empty shops,” Bracey said, questioning whether commercial property prices drop as a result. “Change is the one constant we can rely on, we can either be with or ahead of that change or we can complain about it,” he said. “Let the markets decide and let ingenuity take care of those empty commercial units.”

Landlords who once had rents rise on a regular basis will be looking to cut deals in order to retain tenants, added Palmer. “This could be a worry for the pension funds that have relied on these commercial spaces for a sure-fire return on investment,” she said. “As the world moves online and the high street changes, it will have to find an alternative way to sell space or dominos will begin to fall faster than our economy can evolve.”

Peter Scott, head of retail consultancy at Graystone Strategy and former Arcadia area manager across Oxford Street said the deals don’t necessarily mean empty units will litter the country.

“I think Topshop, Topman and Miss Selfridge don’t need to have a future on the high street, but there’s merit to pop ups or high-profile locations, particularly for Topshop, which is an iconic brand with great credentials,” he said. “It would work best when aligned to big bet launches - such as designer collaborations or when London Fashion Week is on.”

Government thinking

Local councils have a big role to play in shaping the future of town centres, said Rick Smith, MD at Forbes Burton, and they should be planning how their high streets will look. “They should be liaising with local communities and retailers to make a plan,” he told AccountingWEB. “This needs to happen sooner, rather than later as it is likely that more large chains may disappear yet.”

While the government is concentrating on the Covid endgame and planning for the full reopening of society, the Treasury will also be prioritising the economic recovery as the spring Budget looms, experts said.

“This may well involve more grants or tax relief schemes to give the high street incentives to get shops reopened and town centres busy again,” said Smith. “Sunak may well place additional taxes on online shops to try and level the playing field, but needs to consider the long-term effect this will also have on consumers' confidence.” 

If people do not feel safe enough to shop, then they simply won’t, he said. 

“The 2021 Budget is an opportunity for the Chancellor to support the retail sector’s evolution, while enabling the high street to bounce back and avoid disappearing altogether,” added Lobue. “For example, he could extend the current business rates holiday beyond the end of March 2021 and press ahead with reforms to the business rates system.”

Radical measures, such as a reboot of the ‘Eat out to help out’ scheme for high street stores are unlikely, said Scott, but a review of rates “has to happen”. 

“A broad-brush online tax is also not the way to go as that is how many small business entrepreneurs are surviving,” he said. “Collaborating with local councils and business development groups on measures they need specific to their communities has to be a part of the plan.”

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By AndrewV12
04th Feb 2021 10:28

Extract above

“With the 'bricks-to-clicks evolution' gaining momentum, high street retailers must adapt to survive,

Looking back at the business model of high street retailers, surely there business model was floored, they hired / leased almost all of their stores, they had a gun to their head from day one, when a problem arose on the highstreets there was no wiggle room, they were in a financial straight jacket. But it also shows how virtually none of them could adapt to changing times and circumstances.

But don't forget there are still successes on the high street, down town, seems to be don't have to bigger stores, one floor is more than enough, and for god's sake sell the right products.

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