Comment: store closures are not what they seem
Reading the headlines suggests we are in the midst of a retail apocalypse with high streets and shopping centres being slowly obliterated by the ongoing closure of physical stores.
Research from the Centre for Retail Research reveals that a shocking 47 stores closed each day in 2022, which equates to the loss of a hefty 17,000 outlets over the 12 months.
Although some high profile names succumbed during the period including M&Co, Joules, Sofa Workshop and TM Lewin the reality is that things are not as bad as they would seem from the headlines in the media.
Yes, it has been an awful time for independents – which suffered 11,090 closures in 2022 – but the fact is that for larger companies there is much positivity to report. The number of stores closing because a parent chain with more than 10 stores collapsed did in fact decline by 56% last year compared with 2021.
What the industry has been experiencing is a significant rationalisation by the larger players as they seek to reposition their physical store estates to better satisfy new shopper behaviours and lifestyles in a post-Covid-19 world. They are also now armed with a greater understanding of how to operate bricks and mortar outlets as part of a multi-channel model with all the complexities that click & collect and fulfilment from stores brings.
Marks & Spencer is very much on this journey with its recent announcement of a £480 million investment in what it calls its ‘Store Rotation Programme’. This includes an opening pipeline of 20 new “bigger, better stores” with Stuart Machin, chief executive of M&S, stating: “Our store rotation model is about making sure we have the right stores, in the right place, with the right space and we’re aiming to rotate from 247 stores we have today to 180 higher quality, higher productivity full line stores…whilst also opening over 100 bigger, better food sites.”
Clearly there are closures in this programme but the key aspect is that a portfolio of new and larger stores is providing a very healthy offset to the store closures headlines. This move from smaller stores in less relevant locations is being replicated by a plethora of retailers and includes activity within shopping centres.
Russell Loveland, director of UK asset management at Pradera Lateral that operates Trafford Centre UK says retailers are wanting fewer stores but locating these large flagships in key locations. “They want larger, fewer, better outlets. The Next store at the Trafford centre has grown in size from 45,000 square feet to 65,000 square feet and JD Sports has gone from 15,000 square feet to 50,000 square feet, creating its largest store in the world,” he highlights.
It is a similar scenario at Westfield with its London and Stratford City malls where there is an ongoing upsizing by numerous brands. Space NK has just tripled the size of its unit from 893 square feet to 2,960 square feet and follows the likes of JD Spots, Footlocker and Dr Martens that have all bumped up their footprints.
With such a phenomenon taking place it would be interesting if the retail industry was not quite so fixated on store closure numbers but was also able to take into account square footage measurements. This might provide some surprisingly good news to counter the negative reports that invariably fill the media.
Retail is not dissimilar to the hospitality industry that also focuses on the numbers around pub closures while having little focus on the square footage metric. Access to such numbers would be illuminating because the trend has been to move away from smaller, economically challenged, pubs and bars to larger premises that offer a broader offer.
Clearly both industries need a new set of metrics to more clearly monitor the state and health of their respective landscapes. Maybe this is merely one of many new measurements that the retail sector needs to adopt now that it operates in a very different environment from when absolute store numbers and sales per square foot were all that mattered.
