3 October 2020
29 September 2020
Business specialist Ian Borley is the recently retired senior partner of KPMG’s East Midlands practice:
“It seems that not a day goes by with more depressing news about a retailer going bust, with the consequent loss of jobs and yet another empty shop on our high streets.
More often than not, this is blamed on Coronavirus, but I would argue that the pandemic has merely accelerated the transformation of retail in the UK that was already happening.
Obviously, the popularity of online shopping had been increasing steadily for years and it’s easy to see why – a combination of great pricing, total product availability, the ability to try products in your own home, free deliveries and free returns, and the avoidance of travel and parking costs for the consumer.
Add to that the effect of lockdown, with many of us working from home and staying away from the High Street, and it’s obvious why store-based retailers have struggled, burdened as they are with a high fixed cost base.
Those costs have escalated in recent years with the triple whammy of increases in both business rates and the minimum wage plus the introduction of the Apprenticeship Levy.
But all is not lost.
Shoppers are returning to our high streets. I don’t for one minute believe that the “office is dead”, so office workers will return to city centres (albeit in lower numbers).
We are fundamentally social animals and will seek out interaction with others rather than working from home, on our own, every day.
So, how should retailers (and our city centres) respond to this new environment we find ourselves in?
– Differentiate yourself from the equivalent online offering. For example, why would consumers use Debenhams and Beales ahead of Amazon or ASOS?
– Keep up with changing customer demands. This might be changing fashions (Laura Ashley, TM Lewin), a change in values or changes in the customer demographic (M&S customers are now more likely to buy branded sports products than cardigans).
– Adapt to changing technology. For example, Jessops learnt to their cost that mobile phones and digital cameras were rapidly making traditional cameras and their peripherals redundant. Similarly, holiday makers can now easily pull together a flight and accommodation online for themselves, making package holiday operators less relevant.
– Beware the crowded market. There are always casualties when supply exceeds demand in a fixed-cost business; witness mid-price fashion and mid-priced restaurant chains. How do you stand out from all that competition?
– Avoid expanding too quickly and/or over-committing to long and expensive leases because footfall can change rapidly in city centres. Hair salons like Supercuts and Regis UK arguably suffered in this way. Many other retailers have had to go through the extremes of a Company Voluntary Arrangement (CVA) or pre-pack insolvency to escape these lease commitments (Go Outdoors, Monsoon Accessorize, Benson Beds).
– Can you really take on the grocery multiples or internet giants? You need something different to be able to compete against their ultra-keen pricing, stock availability and distribution networks. That might be a unique product/brand, fantastic customer service or quirky store/website design.
– Re-evaluate your bricks-and-mortar retail strategy – what sort of High Street stores do you need in the future, or do you even need a physical presence? Antler, for example, have now moved to an online-only model.
– Consider your response to larger brands in your sector. Can you effectively compete against them and how would you react to a takeover approach by one of the market leaders – witness the acquisition of Feather & Black (and closure of its stores) by Dreams.
– Calculate how you’ll recover the cost of regular re-branding. Gone are the days when an unchanged retail brand attracted and retained customers for decades. Now, we see brands come and go in two or three years.
There has been a fundamental change in what the high street will need to offer from now on.
So what should a city like Leicester do to survive and thrive in a pandemic-affected, post-Brexit world?
In 2020 we have seen fundamental changes in how people work, study, shop and travel.
This, in turn, will undoubtedly impact how and where people will want to live too.
I strongly believe that, without successful businesses in a city to provide employment and pay rates and taxes, a city soon plunges into a desperate downward spiral.
One only has to look at what happened to Britain’s old powerhouse cities when their foundation industries of coal, steel, shipbuilding and coal mining disappeared.
What, then, does the modern business require of a city the size of Leicester?
– Modern factories are highly automated, making huge use of data and analytics, and require easy and efficient access to the road network to transport goods and allow workers to be able to get there easily, plus space to grow and use flexibly (and maintain social distancing).
– The massive warehouses used by today’s wholesale and distribution businesses inevitably need to be located near to motorways and/or rail heads. We need a strategic approach to this.
– I don’t believe that the city centre office is dead, but I do think office-based businesses will use their (expensive) city centre space very differently. With most employees able and willing to work from home, the office of the future will be used only for those activities where people actually need to get together – collaboration on projects, socialising/networking, training (possibly) and idea-sharing. That requires modern, flexible space with excellent internet connectivity. Unfortunately, such office space is woefully short on the ground in somewhere like Leicester at the moment (as it is in many other UK provincial cities, to be fair).
– Hospitality and leisure businesses will thrive best in a “place of purpose” – where we create a reason for the consumer to visit. A combination of shopping, leisure, sport, culture and dining that the consumer cannot get elsewhere.
How, then, should Leicester respond to these changes? To succeed in this new reality, a city needs to be effective, accessible and attractive.
• It needs to provide retailers with stores they need today, not what was required 20-30 years ago. Many of the shops on Gallowtree Gate, for example, are too large and badly laid out for current needs. We need to ask ourselves why so many household names (especially high-end) don’t have an outlet in Leicester.
• We must provide more Grade A, flexible office space, with car parking, to attract and retain good quality services businesses.
• Leicester needs more homes for the future in the city centre – not just student accommodation. We need to encourage more professionals and families (who spend in the city) to want to live in the city. That requires modern, attractive housing with room for people to work from home, close to schools, GP practices, green spaces. Neither more flats, nor old terraced housing, both of which Leicester already has in droves, meet that need.
• It needs to be digitally connected, with top quality broadband available for all and spaces for people to work from who are unable to work from home.
• In my opinion, Leicester is becoming more car-unfriendly. We suffer from much worse rush hour jams than many comparative-sized cities as a result of a plethora of traffic lights, little-used cycle lanes dramatically reducing road capacity and bus stops in the carriageway rather than in laybys. Add to that the poor and expensive car parking on offer, it’s no wonder that many car drivers shun the city. And those car drivers will take their business and consumer spend elsewhere.
• We enjoy a great train service down to London, but east-west rail connections have long been an issue – crowded, slow and expensive. If Leicester is to benefit from the huge investments being made in Birmingham, this has to be fixed.
• It is not at all clear how businesses and residents in Leicester will benefit from HS2. Why would anybody travel 45 minutes (on a good day) to Toton to start a journey to London or Birmingham?
• We still have some very attractive architecture in the city centre but much of this has been vandalised at street level by imposing bland, uniform corporate brands on store fronts. Why not reinstate that original architecture down to pavement level to create an environment that attracts visitors, as is the case in cities like Bath and York? And light that architecture to accentuate it at night.
• Against that, we suffer from some awful 1960s and 1970s concrete monstrosities. Take Gallowtree Gate again – it doesn’t look good and it doesn’t work well. Time for the bulldozer?
• The major gateways into our city centre ought to be welcoming. I would argue that the “private” shops, boarded-up pubs and pound stores in Granby Street (the main gateway into the city centre from the railway station) do exactly the opposite.
All of this will require public sector intervention – in creating a vision for Leicester for 2030, in planning and investment.
The scale of change required is such that individual businesses and landlords are unable to achieve this on their own, so we cannot leave it to the market alone.
That would take too long and I fear Leicester would then be left behind for ever.
And yes, this will take a lot of money, but what’s the alternative – do nothing and watch the city decline for years to come?
The city council has already proved it is capable of delivering positive change in the improvements to the public realm and development of waterside area – and I think these are widely applauded.
But now is the time to step up as never before.”
12 September 2020
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