High street retailers teeter on the brink

With every rent day, the threat of redundancy.

"Lady Day" might sound like a nice day at the races but traditionally it was the Feast of the Annunciation, and the first of the four traditional English quarter days. The "Lady" here being the Virgin Mary. Falling on March 25, Lady Day was even New Year’s Day up to 1752.

Every rent quarter day brings speculation that another retailer will go under, especially after the first quarter day on 1 January this year heralded the administrations of HMV, Jessops and Blockbuster. Yet there were notably fewer major administrations following the most recent rent quarter day at the end of March.

Of course, a rent day does not automatically trigger retail insolvencies. The high profile casualties we have seen since October, with the exception of fashion retailer Republic, have been retailers with a business model that has been challenged by the e-commerce market, such that the delivery method of their core products to customers has fundamentally altered. They cannot survive on the scale they operated in previously in a principally bricks and mortar operation. (Republic’s failure in February was because it was burdened by too many loss-making stores as customer’s buying habits became more budget focused, rather than being challenged by technology.)

In general, this isn’t the case of a fashion retailer buying the wrong ranges for a few seasons or failing to brighten up its stores. They face a technology competitor to their business model that is far greater than any business competitor. These challenges cannot be dodged and a rent day bill might just be the last straw, but is not the cause.

The number of stores closed by retail high street chains in Britain has soared over the past 12 months and the start of this year felt like the end of 2008 when Woolworths collapsed. According to research by the Local Data Company, there were a total of 7,337 store closures in 2012. It seems the retail world has just had another "clear out" this year.

Those are stark statistics but completely relatable when you factor in two big phenomena threatening the high street. The first is technology via the internet, the second, the significant expansion of out-of-town shopping centres, which has made it almost impossible for local high streets to compete.

The cost of parking is one reason the high street cannot compete with out of town shopping. Moreover, 30 years ago, high streets had butcher’s shops, greengrocers, off-licences, chemists and a range of clothing and fashion retailers. Retailers with financial clout have moved out to the shopping centres – and more will follow this year and next. The anchor stores are deserting the high street, as shown by the number of retail chains closing their stores there. This leaves the shops that remain in an even more difficult predicament.

Despite these challenges, high-street retailers can still prosper if they adapt. All too often in my job I see management sticking to what they know – what was once a successful formula – in the face of all the evidence telling them they need to change. Unfortunately, by the time we are called in, it’s usually too late. As individuals’ shopping habits change, retailers must too. That means multi-channel buying – not just static internet buying – but mobile shopping as well. Online does not have to be completely divorced from bricks and mortar. Shops and online can work well together. “Click and collect” has given a life line to stores such as Argos. John Lewis has excelled in using technology to get people into their shops.

Many stores have become too big and inefficient, unable to attract the footfall in relation to rent. Retailers can instead reduce the size of their stores and operate them like large vending machines. A customer can go in and put their card in a giant jukebox – where they can pick a film or return it for example. If they are late, it automatically charges their credit card. There are ways for retailers to continue to prosper with some restructuring.

Those shops that remain may benefit from the others’ decline and closure. Despite the headline cases, corporate insolvency rates remain historically low, especially when contrasted with previous recessions and periods of recovery. Low insolvency rates are good for employment, which is a key concern following the many retail administrations. In fact just under half of jobs in the major retail insolvencies survived the administration process in 2012.

However, while businesses exist in distress and corporate insolvencies remain low, the economy continues to stagnate. A healthy economy requires activity at both ends of the economic cycle – it needs business growth and expansion, as well as the recycling of capital following business failure. The high street can survive if it changes and adapts, and deals with greater challenges than the quarterly rent bill.

This story first appeared on economia

Photograph: Getty Images

This is a news story from economia.

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Erdogan’s purge was too big and too organised to be a mere reaction to the failed coup

There is a specific word for the melancholy of Istanbul. The city is suffering a mighty bout of something like hüzün at the moment. 

Even at the worst of times Istanbul is a beautiful city, and the Bosphorus is a remarkable stretch of sea. Turks get very irritated if you call it a river. They are right. The Bosphorus has a life and energy that a river could never equal. Spend five minutes watching the Bosphorus and you can understand why Orhan Pamuk, Turkey’s Nobel laureate for literature, became fixated by it as he grew up, tracking the movements of the ocean-going vessels, the warships and the freighters as they steamed between Asia and Europe.

I went to an Ottoman palace on the Asian side of the Bosphorus, waiting to interview the former prime minister Ahmet Davu­toglu. He was pushed out of office two months ago by President Recep Tayyip Erdogan when he appeared to be too wedded to the clauses in the Turkish constitution which say that the prime minister is the head of government and the president is a ceremonial head of state. Erdogan was happy with that when he was prime minister. But now he’s president, he wants to change the constitution. If Erdogan can win the vote in parliament he will, in effect, be rubber-stamping the reality he has created since he became president. In the days since the attempted coup, no one has had any doubt about who is the power in the land.

 

City of melancholy

The view from the Ottoman palace was magnificent. Beneath a luscious, pine-shaded garden an oil tanker plied its way towards the Black Sea. Small ferries dodged across the sea lanes. It was not, I hasten to add, Davutoglu’s private residence. It had just been borrowed, for the backdrop. But it reminded a Turkish friend of something she had heard once from the AKP, Erdogan’s ruling party: that they would not rest until they were living in the apartments with balconies and gardens overlooking the Bosphorus that had always been the preserve of the secular elite they wanted to replace.

Pamuk also writes about hüzün, the melancholy that afflicts the citizens of Istanbul. It comes, he says, from the city’s history and its decline, the foghorns on the Bosphorus, from tumbledown walls that have been ruins since the fall of the Byzantine empire, unemployed men in tea houses, covered women waiting for buses that never come, pelting rain and dark evenings: the city’s whole fabric and all the lives within it. “My starting point,” Pamuk wrote, “was the emotion that a child might feel while looking through a steamy window.”

Istanbul is suffering a mighty bout of something like hüzün at the moment. In Pamuk’s work the citizens of Istanbul take a perverse pride in hüzün. No one in Istanbul, or elsewhere in Turkey, can draw comfort from what is happening now. Erdogan’s opponents wonder what kind of future they can have in his Turkey. I think I sensed it, too, in the triumphalist crowds of Erdogan supporters that have been gathering day after day since the coup was defeated.

 

Down with the generals

Erdogan’s opponents are not downcast because the coup failed; a big reason why it did was that it had no public support. Turks know way too much about the authoritarian ways of military rule to want it back. The melancholy is because Erdogan is using the coup to entrench himself even more deeply in power. The purge looks too far-reaching, too organised and too big to have been a quick reaction to the attempt on his power. Instead it seems to be a plan that was waiting to be used.

Turkey is a deeply unhappy country. It is hard to imagine now, but when the Arab uprisings happened in 2011 it seemed to be a model for the Middle East. It had elections and an economy that worked and grew. When I asked Davutoglu around that time whether there would be a new Ottoman sphere of influence for the 21st century, he smiled modestly, denied any such ambition and went on to explain that the 2011 uprisings were the true succession to the Ottoman empire. A century of European, and then American, domination was ending. It had been a false start in Middle Eastern history. Now it was back on track. The people of the region were deciding their futures, and perhaps Turkey would have a role, almost like a big brother.

Turkey’s position – straddling east and west, facing Europe and Asia – is the key to its history and its future. It could be, should be, a rock of stability in a desperately un­stable part of the world. But it isn’t, and that is a problem for all of us.

 

Contagion of war

The coup did not come out of a clear sky. Turkey was in deep crisis before the attempt was made. Part of the problem has come from Erdogan’s divisive policies. He has led the AKP to successive election victories since it first won in 2002. But the policies of his governments have not been inclusive. As long as his supporters are happy, the president seems unconcerned about the resentment and opposition he is generating on the other side of politics.

Perhaps that was inevitable. His mission, as a political Islamist, was to change the country, to end the power of secular elites, including the army, which had been dominant since Mustafa Kemal Atatürk created modern Turkey after the collapse of the Ottoman empire. And there is also the influence of chaos and war in the Middle East. Turkey has borders with Iraq and Syria, and is deeply involved in their wars. The borders do not stop the contagion of violence. Hundreds of people have died in the past year in bomb attacks in Turkish cities, some carried out by the jihadists of so-called Islamic State, and some sent by Kurdish separatists working under the PKK.

It is a horrible mix. Erdogan might be able to deal with it better if he had used the attempted coup to try to unite Turkey. All the parliamentary parties condemned it. But instead, he has turned the power of the state against his opponents. More rough times lie ahead.

Jeremy Bowen is the BBC’s Middle East editor. He tweets @bowenbbc

This article first appeared in the 28 July 2016 issue of the New Statesman, Summer Double Issue