PwC | UK

Store Openings and Closures: January - June 2019

Another record for store closures but openings hint at a retail revival

What’s happening on the British high street?

The gap between store closures and openings has again widened to record levels, but there are glimmers of positivity for certain sections of the retail industry.

The first half of 2019 saw a record net 1,234 stores disappear from Britain’s top 500 high streets, with retailers and leisure operators continuing restructuring activity and services increasingly moving online. We also saw a total of 2,868 store closures, equivalent to 16 per day and the most for five years.

Looking at individual retail sectors, only 15 out of 96 sectors showed a net growth in store numbers, with just two of these sectors growing by double figures. The biggest net declines were fashion retailers (-118), restaurants (-103), estate agents (-100) and pubs (-96).

Despite this negative outlook, there are green shoots of optimism. Store openings across the retail sector increased marginally from last year to 4.1%. In reality, this may mean only 1,634 high street store openings (9 per day), but this is a sign that agile retailers are managing to thrive in the face of this challenging environment. Successful, often smaller brands are opening in categories that have experienced heavy closures, and nimble retailers are re-siting their stores to take advantage of vacant space and new opportunities in better catchment areas.

Jan-Jun openings and closures by year -

Click on a region to select it

Closures
Openings
Net change

Source: LDC

"The good news is that there are green shoots as new entrants are even entering embattled sectors such as fashion. Consumers still want to spend their money in well-located and invested stores and leisure venues on the high street."

Lisa HookerLeader of Industry for Consumer Markets, PwC UK

High street retail closures at five-year high

There is no hiding the 2,868 store closures in the first half of 2019 - the highest number in five years, and up more than 6.5% from last year.

Fashion retailers saw the biggest decline in the first half of 2019, with 262 closures and a net loss of 118 stores. These closures appear to have been heavily driven by administrations, rather than Company Voluntary Arrangement (CVAs). Interestingly, several administrations came after CVAs, suggesting that many CVAs are unsuccessful. With several fashion retailers using CVAs to rationalise their estate and others currently seeking CVA approval, fashion will likely see more closures in the second half of the year.

“This reinforces our view that any business restructuring needs to happen alongside a wider programme of change to meet the ever increasing demands of modern, multi-channel consumers.”

Zelf Hussain, Retail Restructuring Partner, PwC UK

Away from fashion, other service businesses have also been hit particularly hard.

Estate agents saw a net decline of 100 stores (143 total closures), with a slowdown in the property market and increasing competition from online continuing to eat into high-street agents’ market share. Banks and financial services also saw significant outlet losses, with a total of 116 closures, as they continue to move to digital platforms. This comes as little surprise as consumers become increasingly comfortable performing regular tasks and chores online.

Also unsurprisingly, given the cost headwinds and consumers’ increasing preference to entertain at home, pubs and bars saw 167 units closing in the first half of 2019. These closures, however, were offset by newer brands looking to take advantage of vacancies in the market, opening 71 units across the high street.

Even categories that have seen good growth in recent years - such as coffee shops, vape shops and beauty salons - have seen slower growth rates or decline as market saturation and economic conditions take effect.

Despite this seemingly bleak outlook, there are positive stories within the sector. With seven of the top 10 closers also amongst the top 10 openers, good operators are still opening, and in large numbers.

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Store openings point to a renewal

Withdrawals from the high street are at a five-year high, but there are strong openings in some sectors. Overall, there were 4,502 changes in occupancy - a pick-up in activity levels compared with 2018.

While many fashion retailers are closing, others are opening, and at speed. With 144 store openings in the first half of 2019, there may be a fashion sector renewal abound. Equivalent to nearly one opening a day, the openings are a mix of designer and high-street labels, targeting younger and older consumers.

With customer experience an important engagement point for fashion retailers, there is still a need for physical stores to stave off the threat of online-only retailers. Interestingly, this is particularly true of more premium or niche brands, where stores play a more important role in communicating with, and selling to, their customers. Fewer openings were made by value fashion retailers, which have seen more of their share taken by online pure players. By balancing physical and digital offerings, agile brands can embrace genuine multi-channel retail, where their customers demand it.

Charity shops are also opening rapidly (101 openings in the first half of 2019), helped by more professionalisation and consolidation in the sector, favourable business rates and that they might spend less on store fit-outs than other retailers. This allows them to open and relocate more easily when a lease comes up for renewal, reflected in the equally large number of closures seen in the first half of 2019. Openings (and closures) in this sector are generally being led by the larger charities.

On the whole, we are seeing retailers flourish who have managed to create a strong brand and offer consumers an enjoyable customer experience, something which often only a physical store can provide.

“Successful operators are taking advantage of the current turmoil to either open stores that were not economically feasible in the past, or to move stores to better locations or to take advantage of lower rents. And it’s this nimbleness that will set apart winning retailers in years to come.”

Zelf Hussain, Business Restructuring Partner, PwC UK

Net growth for some retail sectors

What’s interesting in many of these growth categories is the prevalence of franchise operators, suggesting that smaller companies and local entrepreneurs see opportunities on the high street, even when larger chains are not prepared to take the risk in the current economic climate. In previous surveys, we saw this with the growth of cake shops, vape stores and ice cream parlours, while this year the trend is favouring takeaways, and chicken shops in particular, as well as yoga studios and convenience stores.

More challenges ahead for the high street, but opportunities for ambitious retailers

Our survey findings for the first half of 2019 confirm that there has been no let up in the rapid change affecting Britain’s high streets. While the economic environment and cost pressures may have precipitated the current wave of closures, fundamentally they are a response to the changing way that consumers prefer to shop and spend their leisure time, and the genie cannot be put back in the bottle.

Existing operators need to fundamentally question the role of their high street outlets, how many they should have, where they should be, and for what purpose, and they need to do this fast. Equally, as the internet has removed the need for consumers to transact physically, for both goods and services, the reality is that fewer high street outlets will be needed in the future, and that space may be used very differently to today.

But, for those operators that have understood these challenges, the high street also offers opportunities to engage with consumers in a different way - for example, as a place to experience their brand, rather than merely transact. The increase in store openings in the first half of 2019 is evidence that forward-thinking retailers and leisure operators are starting to take that opportunity.

“Retailers need to keep investing to make stores and propositions relevant to today’s consumers, but stakeholders must also find ways to ease the burden on operators, keep investing in the high street, and encourage new and different types of operators to fill vacant space."

Lisa HookerLeader of Industry for Consumer Markets, PwC UK