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.

Getty
Show Hide image

What happens when a president refuses to step down?

An approaching constitutional crisis has triggered deep political unrest in the Congo.

Franck Diongo reached his party’s headquarters shortly after 10am and stepped out of a Range Rover. Staff and hangers-on rose from plastic chairs to greet the president of the Mouvement Lumumbiste Progressiste (MLP), named after the first elected leader of the Democratic Republic of Congo.

Diongo, a compact and powerfully built man, was so tightly wound that his teeth ground as he talked. When agitated, he slammed his palms on the table and his speech became shrill. “We live under a dictatorial regime, so it used the security forces to kill us with live rounds to prevent our demonstration,” he said.

The MLP is part of a coalition of opposition parties known as the Rassemblement. Its aim is to ensure that the Congolese president, Joseph Kabila, who has been president since 2001, leaves office on 19 December, at the end of his second and supposedly final term.

Yet the elections that were meant to take place late last month have not been organised. The government has blamed logistical and financial difficulties, but Kabila’s opponents claim that the president has hamstrung the electoral commission in the hope that he can use his extended mandate to change the rules. “Mr Kabila doesn’t want to quit power,” said Diongo, expressing a widespread belief here.

On 19 September, the Rassemblement planned a march in Kinshasa, the capital, to protest the failure to deliver elections and to remind the president that his departure from office was imminent. But the demonstration never took place. At sunrise, clashes broke out between police and protesters in opposition strongholds. The military was deployed. By the time peace was restored 36 hours later, dozens had died. Kabila’s interior minister, claiming that the government had faced down an insurrection, acknowledged the deaths of 32 people but said that they were killed by criminals during looting.

Subsequent inquiries by the United Nations and Human Rights Watch (HRW) told a different story. They recorded more fatalities – at least 53 and 56, respectively – and said that the state had been responsible for most of the deaths. They claimed that the Congolese authorities had obstructed the investigators, and the true number of casualties was likely higher. According to HRW, security forces had seized and removed bodies “in an apparent effort to hide the evidence”.

The UN found that the lethal response was directed from a “central command centre. . . jointly managed” by officials from the police, army, presidential bodyguard and intelligence agency that “authorised the use of force, including firearms”.

The reports validated claims made by the Rassemblement that it was soldiers who had set fire to several opposition parties’ headquarters on 20 September. Six men were killed when the compound of the UDPS party was attacked.

On 1 November, their funerals took place where they fell. White coffins, each draped in a UDPS flag, were shielded from the midday sun by a gazebo, while mourners found shade inside the charred building. Pierrot Tshibangu lost his younger sibling, Evariste, in the attack. “When we arrived, we found my brother’s body covered in stab marks and bullet wounds,” he recalled.

Once the government had suppressed the demonstration, the attorney general compiled a list of influential figures in the Rassemblement – including Diongo – and forbade them from leaving the capital. Kinshasa’s governor then outlawed all political protest.

It was easy to understand why Diongo felt embattled, even paranoid. Midway through our conversation, his staff apprehended a man loitering in the courtyard. Several minutes of mayhem ensued before he was restrained and confined under suspicion of spying for the government.

Kabila is seldom seen in public and almost never addresses the nation. His long-term intentions are unclear, but the president’s chief diplomatic adviser maintains that his boss has no designs on altering the constitution or securing a third term. He insists that Kabila will happily step down once the country is ready for the polls.

Most refuse to believe such assurances. On 18 October, Kabila’s ruling alliance struck a deal with a different, smaller opposition faction. It allows Kabila to stay in office until the next election, which has been postponed until April 2018. A rickety government of national unity is being put in place but discord is already rife.

Jean-Lucien Bussa of the CDER party helped to negotiate the deal and is now a front-runner for a ministerial portfolio. At a corner table in the national assembly’s restaurant, he told me that the Rassemblement was guilty of “a lack of realism”, and that its fears were misplaced because Kabila won’t be able to prolong his presidency any further.

“On 29 April 2018, the Congolese will go to the ballot box to vote for their next president,” he said. “There is no other alternative for democrats than to find a negotiated solution, and this accord has given us one.”

Diongo was scathing of the pact (he called it “a farce intended to deceive”) and he excommunicated its adherents from his faction. “They are Mr Kabila’s collaborators, who came to divide the opposition,” he told me. “What kind of oppositionist can give Mr Kabila the power to violate the constitution beyond 19 December?”

Diongo is convinced that the president has no intention of walking away from power in April 2018. “Kabila will never organise elections if he cannot change the constitution,” he warned.

Diongo’s anger peaked at the suggestion that it will be an uphill struggle to dislodge a head of state who has control of the security forces. “What you need to consider,” he said, “is that no army can defy a people determined to take control of their destiny . . . The Congolese people will have the last word!”

A recent poll suggested that the president would win less than 8 per cent of the vote if an election were held this year. One can only assume that Kabila is hoping that the population will have no say at all.

This article first appeared in the 01 December 2016 issue of the New Statesman, Age of outrage