By Mark Richards.
Who were the high street’s winners and losers this Christmas? And what does that mean for the long term future of our towns and shops? Can the UK high street be saved? And more to the point, should we save the high street? Or just accept that change is inevitable?
We ended last week by briefly touching down in the UK high street en route to Las Vegas. Last Thursday was ‘Super Thursday – the day on which most of the big retailers reported their Christmas trading figures. Generally speaking, it was a poor Christmas for the UK high street, labelled the worst Christmas for ten years – with Marks and Spencer’s and Debenhams having more than their fair share of the gloomy headlines.
So who were the winners and losers from Christmas 2018? More importantly, does doing well or badly at Christmas have any implications for a company’s future. And finally, we ask the most important question of all: is there any way to save the high street in most towns, or is Mike Ashley, boss of Sports Direct, right when he says that the “high street will be dead by 2030.”
Who won and who lost in 2018?
Given that footfall in the Boxing Day sales was reported to be 4.5% down on last year, surely winners were thin on the ground?
Well, not at Tesco, which reported having its best Christmas for ten years, with ‘like-for-like’ sales up by 2.2% in the six week period to January 5th. Very clearly, though, Tesco has been through some tough times over the last ten years. It may have done well this year, but ‘our best Christmas for ten years’ may not have been a very high bar.
Next also did well, helped by a late flurry of online sales, and Morrisons saw an increase in like-for-like sales for the fourth consecutive year.
But which retailer had the biggest percentage growth over the festive period? An old friend of these articles, Gregg’s – now, of course, home to the vegan sausage roll (“flying out” according to my local branch).
Past performance is no guarantee…
We have all seen the warning on savings and investment products: past performance is no guarantee of the future. Does the same hold good in the high street? Does doing well at Christmas mean that a company is secure? Does doing badly mean it is likely to go out of business?
If we go back six years to Christmas 2012 then the writing was on the wall for Blockbuster and HMV as poor Christmas sales sealed their fate. Interestingly HMV was rescued in 2013 but has recently gone into administration again. The only major clothing store to report poor sales that year was M&S, while Tesco and Sainsbury’s were having a spat over which supermarket had done best. John Lewis said that like-for-like sales had jumped 13% in the run-up to Christmas (that is the John Lewis that saw its profits fall 99% last year) and no-one even bothered to report on those two discounting upstarts, Aldi and Lidl.
Three years later, what did Christmas 2015 look like? Among the ‘winners’ were John Lewis, WH Smith and Debenhams – which claimed a 3.7% rise in sales and said it had offered fewer discounts. Marks and Spencer’s again featured among the losers – as sales fell 2.5% – and was joined on the naughty step by Next and Argos.
Three years on and Argos is now part of Sainsbury’s – an acquisition I simply could not understand and one which does not appear to be working out well – while M&S continues to struggle. Next, though, has made a recovery, and was one of this year’s better performers.
So what conclusion do we draw from all that? While a poor Christmas is not a good sign, it is not necessarily terminal. Retailers can and do recover. Or they have in the past. The conclusion I draw is that the retail market is changing more quickly than you might imagine from a walk down the high street. Even a good Christmas will not guarantee survival and I will be amazed if 2019 does not bring further store closures from M&S and Debenhams. I would also expect to see WH Smith and Boots start to close high street branches.
Can we save the high street?
Clearly, closures of big stores are going to impact high streets up and down the UK. Is there anything that can be done to save the high street or – as we have written previously – is it the equivalent of trying to save the horse-and-buggy economy once the motor car has been invented?
Altrincham in Cheshire is a town frequently cited as one that has turned around its shopping centre. It has done this by revitalising its market and ‘turning it into a haven for middle-class foodies.’ One retailer, quoted in a BBC article, says that the market is “always buzzing. You get lots of yummy mummies with their babies during the week,” she adds.
With the greatest possible respect to the BBC’s reporting standards, not every town has a plentiful supply of ‘yummy mummies.’ If you look at Redcar and Bridlington on the East Coast, you see two town centres that have been hit very hard indeed by the closure of their local M&S. Sadly, there are far more Redcars and Brids than there are Altrinchams – and it is going to take much more than the Chancellor’s Digital Services Tax or Mike Ashley’s calls for an online sales tax to save them.
But should the high street be protected?
Yes, of course, it should. If the big retailers are not protected then the local shops that rely on the footfall will also go out of business. Jobs will be lost, town centres will become wastelands, choice will be restricted and we will all be the poorer.
No, of course, they should not. Why should the taxpayer subsidise a business that has been mismanaged? Anyone who goes into Marks and Spencer’s instantly sees a business that has failed to move with the times and whose customer base is getting steadily older. And like any business, retail is risky: it is not the taxpayers’ job to protect incompetent managers.
Like a lot of people I love handmade items – my current object of lust is a desk handmade from reclaimed wood – and quirky, unusual things. Do I find them on the high street? No, they are on Etsy and – appropriately – Not on the High Street. You might even argue that the internet has created far more business online than it has destroyed on the high street. It is simply change: and change is inevitable…