Has coronavirus escalated the death of the UK high street?

Prior to the coronavirus pandemic, the UK high street was already facing uncertainty as a result of volatile trading conditions, with many household names either totally disappearing from the high street or having to go through some form of restructuring resulting in several store closures and redundancies. Although there are a few reasons as to why certain retailers were struggling, it ultimately came down to a decrease in sales volume, with fewer companies reporting signs of growth.

If you take into consideration the changing habits of consumers who had started redirecting their spending on other sectors such as leisure and travel, and engaging in the increasingly popular phenomenon of online shopping, it is no surprise why many retailers started to genuinely worry about the future. Of course, in an ideal world, these retailers could amend their business model to target a new generation of consumers, whilst offering something unique in the overall shopping experience to its existing customer base to revive their sales volume. However, we do not live in an ideal world and the harsh reality is that the high street could be facing an even more uncertain future as a result of the lasting effects from Covid-19.

Two years ago, we published an article titled ‘The Ominous Predicament of the UK High Street’ which looked at the reality of how several household names started to feel the strain of the ever-changing retail environment. It was Toys R Us – a company which was beset by problems for many years which was headline news, with the eventual lack of investment ultimately driving the final nail in its coffin. Investors clearly realised that it was pointless ‘flogging a dead horse’ and with the company failing to adapt to the evolving market, the company had no option but to be placed into administration. The company’s US parent was in chapter 11 having sought protection back in September 2017, but later announced that the recovery plan was no longer viable, resulting in the closure of all Toys R Us stores. A domino effect appeared soon after, as in 2018 we started seeing several other retailers collapse, most notably Maplin’s and Warren James. New Look and Carpetright had also started the process of restructuring, closing dozens of stores, whilst House of Fraser also sought to reduce its rental commitments. Nonetheless, the warning signs were already there, with an increase in rent, rates, imports and the national minimum wage all major contributing factors. Throw in the increase in competition, the ever-growing popularity of shopping online, and a new generation of consumers meant that no one was immune to the threat of potentially having to restructure.

Fast forward two years later, and the grim reality is that the high street is in an even more precarious state now, or even worse, than it has ever been before. According to new data by retail intelligence firm Springboard, almost 11 percent of UK stores were vacant in July, which is the highest level recorded since January 2014. Alarmingly, it was also reported that there was a 30 percent drop in footfall in August, compared to the same period 12 months ago. Understandably, these figures can be put down to people choosing to stay away from the high street due to the ongoing health risks associated with the pandemic, however it is worth pointing out that according to industry experts, the high street was heading in this direction, with coronavirus only escalating the process.

Previous retail giants, Debenhams, Monsoon, Victoria’s Secret and Laura Ashley are just some of the recognisable high street names which have collapsed recently, whilst other retailers such as Marks and Spencer and Boots have had to slash thousands of jobs due to the pandemic. Across the board, the sector has been hit, with The Centre for Retail Research warning that job losses could reach a staggering 235,000, mainly as a direct result of store closures. Although there was some positive news last month with a reported increase in retail sales in the UK back above pre-pandemic levels, this was partly due to an increase in online shopping. We learnt just last week that thousands of redundancies were planned in June and July in the retail sector alone, with prominent high street names such as Boots, John Lewis and furniture retailer DFS among the names to announce redundancy plans in July.

There are signs that the pandemic has accelerated the shift to online sales, as they continue to boom even after the high street reopened in June. Therefore, the outlook is that many retailers will continue to struggle, especially those who are reliant on a physical high street presence to generate high footfall. Helen Dickinson of the British Retail Consortium reiterated the struggle for some retailers by suggesting many of them will be hanging by a thread especially as rents start to accumulate and the September quarter payment date fast approaches. Therefore, unless we can all be convinced back into city and town centres, we are likely to see this trend continue. With England’s Deputy Chief medical officer Professor Jonathan Van-Tam suggesting the UK faces a “bumpy ride over the next few months” after a spike of coronavirus infections became prevalent and the World Health Organisation suggested that “the virus is going to come back”, one can assume that very little will change in terms of footfall and more retailers will have to close stores with numerous redundancies expected as a result. At the same time, it has been reported that British households had suffered the biggest hit to their finances since the oil crisis in the mid-1970s with many experiencing job losses as well. Many returning to work recently such as those in the higher education sector are also apprehensive about redundancies, and with people worried about their finances, a trip to the high street might not be top of their priorities.

The pandemic certainly has not discriminated, with several high-end stores also suffering. Burberry had recently announced 500 job cuts as part of a £55 million cost saving drive, citing that sales in the three-month period to the end of June had been severely impacted by the drop in demand for luxury goods, with the fall in tourist numbers being a significant contributor. Selfridges had also cut 450 jobs across its four department stores in London, Manchester and Birmingham, whilst Harrods was also in the process of axing 670 staff members.

With every high street, restaurants and bars also form an integral part of its identity and we have seen recently how the government has tried to encourage people to support the hospitality sector with the introduction of the ‘Eat Out to Help Out’ scheme. This was certainly a popular idea, with restaurants seeing a surge in bookings with restaurant goers being able to gain a 50 percent discount when eating in. Additionally, this also allowed restaurants who were participating in the scheme to bring back furloughed employees. It was claimed earlier in the month by the Treasury that restaurants had in fact claimed more than 100 million meals under the scheme with 130,000 claims worth £522 million. However, now that the scheme has officially ended, and with tighter restrictions taking place once again especially with the ‘rule of six’ now enforced from 14 September, we could very well start seeing a drop off once again. Add to this that we now have to queue outside certain stores, are told to avoid touching things if possible and not even being allowed to use fitting rooms, many of us will likely continue to shop online as it will be far more convenient to do so. Why wait in a queue with restrictions when doing it from the comfort of your own home is even more convenient than it has ever been?

Yet the old adage of ‘out of every crisis comes opportunity’ even applies to some retailers, with some supermarkets such as Morrison’s now in a position to turn thousands of temporary staff into permanent ones fuelled by the demand for online deliveries. Nonetheless, the repercussions of the coronavirus pandemic present big challenges to the high street and to local authorities seeking to rebuild the local economy. One benefit that could arise from the pandemic is that more and more people are choosing to stay in their local areas, which is great news for local businesses giving them the potential for a rejuvenation of the local high street. This was supported by a recent survey carried out by Deloitte which found that 59 percent of consumers in the UK had used more local stores and services to help support them during the lockdown period. These trends could be set to continue after an increase in Covid cases recently and with the government’s advice to stay local in certain parts of the country which have regional lockdowns imposed on them.

What is evident is that for a sector which was already struggling pre-pandemic, innovation and improvisation will be key to future survival. For example, after announcing eight John Lewis stores would not be reopening after lockdown, their CEO Sharon White had declared a major strategic review for the business. This included taking into consideration using some of the stores as affordable rented housing whilst also introducing a rental and resale service which allowed consumers to rent out products and sell second-hand goods. Furthermore, the company plans on introducing more financial services, as they already offer a credit card and insurance service to customers and intend to grow this part of the business significantly. Selfridges have also improvised by opening outdoor stalls behind its Oxford Street store and offering a rental service for its luxury clothing. It is also in the process of considering repairing and reselling products as part of a wider sustainability drive. Asda is also reportedly considering trialling cleaning robots which will automatically drive around stores and stop if someone is in its way. Even Amazon, who are considered a direct rival to the high street, are looking at launching checkout free stores on the high street before the end of the year, where customers are charged via their smartphone. Marks and Spencer have also gone for innovation by teaming up with urban farming platform Infarm, allowing their customers to purchase freshly produced herbs all from a climate-controlled environment specifically designed to allow fresh herbs to grow.

There is little doubt that with the high street already in a precarious position before the pandemic had struck, those who foresee coronavirus as the ‘death’ of the high street certainly have grounds to put their case across. Yet, whilst the coronavirus pandemic continues to disrupt our everyday lives, only time will tell whether such innovations will help revive the high street. With no signs of the pandemic easing off just yet, and the R rate on the up once again, retailers can only hope that the high street is not dead just yet and that those who innovate can still look to thrive long-term.