The Death of the High Street
There is no doubt that Death of the High Street seems a dramatic headline, but it’s a stark reality that the bottom line dictates the headline. Industries and sectors are relatively good at adaptation and evolution, but there can be inflection points where we are looking at a revolution far beyond just evolution. In order to understand whether we are looking at one or the other, we need to take reference from a deeply established marketplace where we can evaluate the evidence and review what happened in the evolution and measure the key milestones to arrive at a hypothesis. We have opted to use the United Kingdom as the reference market to best understand the Death of the High Street.
Iconic Brands Face Ironic Threats
The great irony for many established retailers who no longer grace the high street is that they reached the pinnacle of the art of retailing only to reach crunch points often resulting from the Internet revolution. Slick shop floors, advanced POS, (Point of Sale), impressive warehousing and distribution for many had never been so good. The best and the fortunate have managed to embrace hybrid retailing with click & collect. The elephant in the room really was born from new emergent monsters such as Amazon and the ubiquitous search engine Google. Search it and you shall find, gone are the days of the bricks and mortar destinations for browsing were analogue, department stores were often in legacy city centres, household and electronics retailers had migrated to vast out of town retail parks, indicative of this was the UK’s second-largest electronics retailer Comet.
Comet Crashes to Earth
Comet, a company spun out of the European business KESA and into the hands of private equity is a classic example of a business with an untimely retail death. Comet boasted around 300 stores spanning the country, The company was a highly regarded name offering a full-service store portfolio open 362 days a year. Starved of working capital and attacked by Internet pricing pressures, just before the critical 2012 Christmas season the shutters came crashing down for good. The human price was high too, some 6,000 jobs vanished overnight. A tragic end for a near 80-year-old household name in consumer electronics. A sign of the times and a warning to many.
17th December 2012 – source the BBC
Devastation of Debenhams
The “coincidence” of private equity has also been a key factor in the slaughtering and demise of the high street. The much-loved department store spanning the UK, Debenhams established in 1778, finally collapsed having lost almost half a billion pounds. Times changed and a lack of investment and the menace of the Internet brought a sad end to 244 years of retailing. with the direct loss of around 12,000 jobs in 2018. A great many jobs were indirect casualties in addition. The vast Debenhams shop spaces remain vacant haunting sites in the devastated high street across the UK. By the first quarter of 2022, 90% of the store remain empty and forlorn. The aftermath saw the brand, domains and intellectual property acquired and a digital pureplay Debenhams is the surviving legacy. The high street death became a digital rebirth acquired by Boohoo.com There was to be no reprieve for thousands of unemployed former workers.
25th January 2021 – source the BBC
Ruinous Business Rates
There is one highly significant culprit in the form of highly aggressive costs known as business rates. These are taxes that are collected by local government and represent a blight and burden on the private sector from the public sector. The ever-hungry tax demands have grown to eyewatering levels, as public sector costs escalate with much of the business rate revenue appearing to be consumed by local governments to fund often lavish pension schemes. Retailers both large and small are hounded relentlessly with the monthly tax take, unlike commercial rents that are paid quarterly, the ability of retailers to carry the burden has simply been too great. Understandably, retail is a sector driven by seasonality, yet the monthly outflow of business rates relentlessly marches on month-by-month.
Over the course of the year 2021, a staggering 17,000 stores shuttered for good in the UK. That’s an average of 47 a day. A detailed review of the fallen shows that fashion retail with banks and financial services were the largest casualties. The local government monoliths seem inept at grasping the reality. indeed, we might ask, “are they killing the golden goose”?
19th February 2022 – source the BBC
Local governments have other very unwelcome intrusions on the high street too. As the ever more frantic efforts to extract cash from the high street rampage unabated, the consumer is also hunted down relentlessly in the form of car parking charges, central city zone surcharges and a relatively new green tax agenda that actually ban private cars from traditional high streets and shopping areas. Let’s be honest, even a vendetta would be more subtle than to seek to exclude or extract a premium for shoppers’ cars as they endeavour to support the cultural norm and British tradition of shopping. Whatever happened to the notion of Britain being a nation of shopkeepers? It looks like it’s a better move to find a job in City Hall than the shopping mall.
Out of Stock a Race Against the Clock
Keeping a stock of in-demand product lines has always been a dominant challenge for the retail sector. In bygone times, consumers grew accustomed to products being out of stock, they had little alternative but to wait and return to stores for the right size or colour to be delivered to a store. But with the rise of the algorithm and state of the art warehousing, rapid low cost direct to home shipping, physical stores are often out of stock and simply can’t compete against the delivery clock. Perhaps if Mr Spock and friends could beam up products to expectant shoppers then physical retail might stand a chance. “To live long and prosper”, seems unlikely.
The ultimate retail deal-killer is the mobile smartphone and the search engine, perhaps the final nail in the coffin. No matter how good a retailer is price will continue into eternity as a deciding factor. How can the high street retailer hope to compete with price-obsessed consumers with highly powerful price comparison tools? We guess they can’t. The conclusion is that the place where consumers consume has been displaced, first online and now an even bigger shift looks like it remakes the feel of the high street, virtually in the Metaverse.
Metaverse – The High Street anew
Like a doctor looking at a sick patient, the diagnoses above spells out the factors killing the high street. But the high street is being reinvented. It’s early days, the future is not yet decided, will the look and feel of the high street be virtual in the Metaverse? We will have to wait and see, but we can see who seems to think so.
Sports digital giant Gymshark has just opened up its first Metaverse store. Benetton, the fashion retailer has also embraced the new virtual mall era. Even Nike has launched on Roblox, which connects with a very youthful demographic. The Nike virtual world includes Nike buildings, sports arenas where players can join mini-games such as dodgeball, tag and “the floor is lava”. You could never do that in a shop. Nike lets users try on clothes in their virtual characters, classic items like Air Force 1, Blazer, Fontanka and Air max 2021. Even the fashion retailer Forever 21 has entered the space. The tide seems to be rising for a new virtual high street. There is no point yearning for the past, there is every point in earning in the future.
Get ready to say goodbye to what’s left of the high street. Perhaps it’s time to head on over to the “buy street”?
Let’s get you up and running for V-tail, zoen.shop, ready to meet you face-to-face, because video channels bring us together.