Exits from Britain’s high streets reach historic highs as openings stall. What does this mean for retailing on the high street in 2019?
A record net 2,481 stores disappeared from Britain’s top 500 high streets in 2018 - 40% higher than the number in 2017. Store openings cannot compensate for high closures, resulting in an overall net decline in store numbers.
In 2018 only 9 stores a day opened on our high streets, over 17% lower than last year. This fall has been the trend since 2013. In fact over the last five years annual store openings have fallen by over 40%.
Store closures also remained high at 16 stores a day. As a result, the gap between openings and closures has reached its highest since our tracking began in 2011.
These figures make it easy to overlook that bricks and mortar are still the most important shopping destination. For example, consumers told us that half of their Christmas shopping spend was done in physical stores. The percentage of shoppers still shopping weekly in store has not altered much since 2015, so there is clearly a willingness to visit the high street to spend.
High streets still have an important role to play. But given the continued trend of shopping online, retailers, landlords and policymakers need to think about the amount of space dedicated to retail. We believe that in future Britain will need less, but better invested, high street space that gives consumers variety, service, convenience, ease of access, entertainment, and, above all, a reason to visit.
Increasingly businesses like banks, estate agents and recruitment services are moving online. The evolution of technology means shoppers are comfortable doing routine, more chore based activity here too. 4 out of 10 of us now make purchases online weekly. All this is changing what we use our high streets for.
As these businesses exit our high streets, others are filling in some of the gaps. Our greater focus on health and wellness generated an increase in Sports & Health Clubs. This growth is despite the fact that 46% of us claim we have exercise instruction and monitoring apps. Our latest report on low cost gyms show they are emerging as clear winners, increasing their market share, with scope to grow further. Bookshops and Ice cream parlours also continue to enjoy good growth. As do Cake shops & patisseries and Vaping & Tobacco Shops.
As you would expect, Banks & Financial Services are the category with the biggest outlet losses. 291 left our high streets over 2018. Fashion retailers too, competing with the convenience of online, are the second biggest losses category.
Value Retailers and Electrical Shops were also high in our Fallers ranking. Shoppers say that 23% of their Consumer Electronics purchases were made online over the last year, and 17% of their Household Electricals purchases.
On top of this, we seem less inclined to treat ourselves at the pub. 107 Pubs and Bars disappeared from our high streets last year.
The high street of the future will be a more diverse space, not solely dependent on stores. The net growth of gyms and sports clubs, Ice cream parlours and Cake shops, plus bringing more shared office spaces and homes will transform what were traditionally shopping areas.
11 of the 12 parts of Great Britain the research covers had the worst year in terms of net store declines since 2013. (store openings - store closures = net figure). The only place where net declines were not the worst in five years was Scotland. Here the closure rate at the lowest it’s been over that period, the 5th consecutive year store closures have fallen. Unfortunately, the 146 openings could not outweigh the 265 closures and so the net number of stores in Scotland still fell by 119. Store closures also fell year on year in East Midlands, South West, Wales, West Midlands and Yorkshire & the Humber, although again, not sufficiently to compensate for falling store openings.
In Wales, although there were still less openings year on year, the slow in closures meant the decline in the net number of stores was the lowest in Great Britain. Despite this 53 stores did still disappear from Welsh high streets.
Given the high volume of stores across Greater London it’s no surprise that this region saw the largest number of net closures, with fashion retailers closing most in the capital (-79 stores). However, percentage wise this was the most buoyant region, with store numbers falling by 2.9% to 17,845. Conversely the North East saw the worst percentage change in stores, with a 5.9% drop in the number of businesses, to 2,128.
The North West was the most volatile region. It experienced the highest percentage of store openings, and the highest percentage of stores closing. Store openings grew by 5.9% but store closures also grew by 10.5%. There are now 5,020 businesses on North West high streets.
On top of an annual decline in high street pub numbers reflecting wider structural trends, 317 chain restaurants disappeared from the top GB high streets across 2018. Italian and pizza chains fared the worst, with 147 outlets disappearing overall. This accounts for 37% of all restaurant closures and was driven by brands such as Prezzo, Carluccio's and Jamie’s Italian. American food had the second biggest net closures, driven by Chimichanga and Byron. This mirrors our PwC UK restaurant market tracker, with 2018 the first year in which the number of restaurant chains has declined since 2008. As recent headlines suggest the casual dining market has been the segment most affected.
Across 2019 we predict openings will remain muted, driven a number of factors. First, our 2019 Retail Outlook suggests consumers are becoming more cautious with their spending. Even the 11% who said they would spend more on eating out said they would manage their spend differently: Of that 11%, 24% said they would cook at home more, 21% said they would spend less in the same place and 17% said they would look for cheaper places to eat. Second, a number of cost challenges continue to affect the sector. These are limiting the appetite, and crucially the ability, to invest. And third, whilst opportunities for roll-out still remain, a number of traditional high-footfall locations that have seen high levels of openings are suffering from over-capacity. Adjusting to the new normal of delivery is also another factor causing market disruption.
2018 has been a challenging year for restaurant chains but not everything is doom and gloom. 2018 has focused minds and a number of operators are investing in their propositions (e.g. refurbishments, menu development, CRM, technology), laying the grounds for future growth. Moreover property pressures are easing to an extent and there remains significant innovation and dynamism in the sector . We remain optimistic on the medium term prospects of the sector despite current challenges.
Featuring at number 2 in our top 5 fallers, Fashion bricks and mortar continues to struggle. 2018 saw an overall net loss of a further 269 stores from GB high streets. This is an improved position against the last two years, where the fall in net store numbers was higher at 381 and 291 respectively. At a national level, fashion store numbers fell by 4.5% to 5,778.
Scotland was the part of Great Britain where fashion fared worst, with store numbers falling by 6.3% to 283. The East of England performed best, with a decline of just 1.8% year on year. Store numbers in the nation's capital fell to 1,314, a fall of 5.7%, or a loss of 79 stores.
Mass market fashion stores continue to be in the squeezed middle with net store closures ahead of both Premium and Value stores.
The reduction in fashion stores is no surprise, with the continued growth of online. Our 2019 GCIS survey showed fashion is the category that is most likely to be purchased online. Almost ¼ of shoppers now shop either exclusively, or make most of, their clothing and footwear purchases here. This number has grown by 7 percentage points since 2014. Social media is becoming an increasingly important communication tool here with 49% of us saying that social media has influenced our fashion purchase decision more than any other category.
We have already seen several casualties in 2019 and there will undoubtedly be more, most likely in all categories except for groceries. Those retailers who will give themselves the best chance of survival must focus on having the relevant proposition, the investments needed to deliver this; the optimal mix of channels and business portfolio and flexible leases.
Covers 66,463 outlets operated by multiple retailers in 500 town centres across Great Britain, between 1 January 2018 and 31 December 2018
Multiples are retailers with more than 5 outlets nationally
The analysis is derived from visiting the top 500 town centres. Each premises was visited and its occupancy status recorded as occupied, vacant or demolished. Vacant units are those units, which did not possess a trading business at that location on the day we visited it. Internal shopping centre data is included where there is cooperation from the landlord.
The town centre is defined as per DCLG’s definition of the retail core. Scotland has no official retail core geography so the geography taken is the postal town area where not specified otherwise.
Net change is openings less closures. The percentage change is derived from the net change figure relative to the total number of live multiple businesses.
The closures per day figure is the total number of closures divided by the total number of days in 2018 (365)