HIGH NOON ON THE HIGH STREET

Many shops are struggling to survive in Britain’s fast-changing and ruthlessly competitive marketplace

Many shops are struggling to survive in Britain’s fastchanging and ruthlessly competitive marketplace

THE original Hard Rock Café still occupies the same incongruous spot in Mayfair, a posh district of London, that it did in 1971, when it opened. Remarkably, the Hard Rock has survived the vagaries of pop fashion and still pulls in a youthful mix of tourists and locals to eat, buy T-shirts and swoon over John Lennon’s glasses. Hamish Dodds, its worldwide boss, says that the restaurant business is doing fine. The retail side, however, is distinctly “soggy”.

This is a common refrain now on Britain’s high streets, although other retail executives will use words such as disappointing or weak. The first few months of this year were unseasonably poor, with a slight pickup in May. But that small improvement cannot mask the more ominous longer-ter m trend, that since mid2014, according to the British Retail Consortium (BRC), a trade group, sales growth has been slowing. Non-food sales have been particularly worrying, and some sectors, such as clothing, have been contracting. BDO, an accountancy firm, runs a HighStreet Sales Tracker that measurestheperformanceof about85 high-street chains. This recorded the biggest drop in sales in April since the depths of the recession in 2009, and overall BDO’s figures have shown a decline since early 2015.

Partly as a consequence, there have been some prominent highstreet casualties this year, such as Austin Reed, a menswear brand, and BHS, a chain of department stores. But these two are only the most visible of the crop. By May there had been 14, affecting 989 stores and over 20,000 employees, already more than in the whole of 2015. If the current rate of attrition is kept up, this could be the worst year since 2012, when the economy was still struggling to come out of recession. Furthermore, all this has been happening as disposable household income has been rising, with median household income and GDP per person recovering last year to prerecession levels.

Fear of a Brexit has probably dampened consumer spending in the very short term, but retailers acknowledge that deeper secular trends are at work that will reshape the British high street for ever, and quickly. The nimble ones who adapt to these trends will survive; Sir Ian Cheshire, the new chairman of Debenhams department stores, for example, says that he could be operating on a very different business model within just ten years. But many will probably not—the BRC has predicted that thousands of shops and almost 1m retail jobs could go by 2025.

So what is going on? One profound change is that consumers now want to spend their money on “experiences”, such as eating out, holidays, cinema or going to the gym, rather than products such as clothes or food—hence the differing fortunes of the restaurant and retail businesses at the Hard Rock Café. Figures show a strong rise in spending on recreation and culture in the first nine months of last year, compared, for instance, with the fall in spending on food and drink. At Debenhams two of the best performers now are swimwear and holidays, bought from in-house travel shops.

Online shopping is also transforming the high street. Consumers, especially the young, now expect “omnichannel” retailing, to be able to switch seamlessly between purchasing on their laptops, on their mobiles and in bricks-and-mortar stores. Retailers that are slow to develop a good online offering will struggle, or worse. Indeed, appearing before a parliamentary committee on June 15th, Sir Philip Green, the former boss of BHS, highlighted the store’s slowness to embrace the internet as the reason for its recent collapse.

Britain’s struggling super markets, such as Tesco, have done reasonably well online, but they now face a new challenge from AmazonFresh, a potentially dangerous rival, which launched on June 9th. This is a British version of the online giant’s fresh-food service in America. The initial rollout has been confined to parts of London, but shoppers will be able to choose from a surprisingly large range of products, including about 20,000 items.

Britain’s online grocery market was worth £8.6 billion ($12.2 billion) last year, and is expected to grow to £15 billion by 2020, so AmazonFresh’s move had been widely expected. Responding to it, however, will cost supermarkets yet more money in a very competitive environment, where market share is often maintained by slashing prices. That’s nice for customers, who have been enjoying shop-price deflation, but means that companies will strain to be profitable. The government has added to the pressure on retail margins by introducing a “living wage”, which came into effect on April 1st, and a levy to pay for apprenticeships.

To survive at all, retailers have to be clearer than ever about who their customers are. Sir Ian argues that it is possible to make money from clothes, but only in certain precise categories; at the high end, at the discount end (such as Primark) and in specialist brands. The rest are “getting hammered”. Equally, retailers could still do more to stay in touch with their increasingly fickle customers, argues Fiona Davis of Women in Retail, a lobby group. It published research on June 7th, in conjunction with Elixirr, a consultancy, showing that despite the fact that 85% of all retail purchases are made or influenced by women, only 20% of executive teams and only 10% of executive boards are female. The latter figures were based on a survey of all retailers in the FTSE 350.

This might explain, argues Ms Davis, why fashion stores, in particular, lose their way. “Having more women around the board table means you have more customers around the table,” she argues. Indeed, more diversity in general would help. Many retailers have not kept up with Britain’s evolving consumer market, and the results are all too evident.