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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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

***

Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.