Opinion: The last dance for shops

Arcadia Group’s collapse into administration this week sent shockwaves throughout the retail sector, but what it really represents is a changing of the guard for UK retail more generally. A change where bricks and mortar retailers continue their retreat from Britain’s high streets and give way to online retailers that have a competitive advantage in just about every sense of the word. Richard Dawson asks what that change means for jobs

What better way to accelerate the decline of the high street than with a global pandemic that causes not one but two national lockdowns, the second of which came at the most critical time of year for retailers?

The answer is that there is no better way.

‘Non-essential shops’ reopen today (December 2) against a backdrop of unimaginable financial pressure, which is already manifesting in company failures and job losses.

Monday (November 30) saw the collapse of long-standing high street stalwart Arcadia Group, which comprises Topshop, Topman, Miss Selfridge, Dorothy Perkins, Evans and Burton, putting 13,000 jobs at risk.

Sir Philip Green’s retail empire had been on the ropes since September 2019 when it revealed a staggering £177.3 million loss for the previous financial year.

Successive store closures in the spring and in November pushed the company into administration, making it the largest corporate failure of the pandemic so far.

Arcadia’s collapse also caused JD Sports to pull out of a rescue deal for department store chain Debenhams, owing to the fact the fashion consortium was Debenham’s biggest customer.

All 124 Debenhams stores are now expected to close permanently, meaning that its 12,000 employees will likely all lose their jobs.

In the same week, Amazon announced that it has broken all-time sales records with an estimated $9 billion having been spent on the website on Black Friday alone.

That’s a 22 per cent increase year-on-year.

Amazon is creating 10,000 jobs this year to cope with such soaring demand, taking its UK workforce to more than 40,000.

The e-commerce giant wants to position itself as a big national employer and there can be no doubting now that it is.

But the real question is whether Amazon, and other online retailers like it, will replace the staggering numbers of jobs being lost on the high street today.

Looking just at Arcadia Group, Debenhams and Amazon, this is clearly not the case.

For the 10,000 jobs Amazon is creating over the course of 2020, probably somewhere in the region of 20,000 will be lost between the other two companies.

The losses could be even greater if new buyers are not found for some of the brands under the Arcadia umbrella, particularly Topshop, which could appeal to a company looking to expand its presence in the market for younger consumers.

Moreover, the Centre for Retail Research estimates that more than 235,000 retail jobs could disappear by the end of 2020, based on an assessment that 20,620 shops will close.

It’s difficult to see how online retailers can replace these losses, particularly when you factor in that the need for human labour with e-commerce is massively reduced.

The average Amazon warehouse worker can process 300 packages per hour – a number many times greater than the amount of sales made by a single worker in most bricks and mortar retail settings.

And so, is this the reality of the post-COVID retail landscape?

While monolithic fulfilment centres proliferate on industrial estates across the country, will high streets in the UK’s cities and town centres continue to be hollowed out?

Shops have reopened just in time for Christmas, but one has to wonder, is this their last dance?

Philip Knight, partner at law firm Womble Bond Dickinson, says: “With reduced footfall on the high street due to COVID-19, a trend towards online retailing and the continuing pressure to meet outgoings such as rates and rent, we predict that the role of the physical store, while still important, will change dramatically.

“The change was already happening and we have seen the evolution of much reduced retail footprints, acting as no more than shop fronts for the online platform, but COVID-19 has meant that retailers will have to accelerate their plans to reduce outgoings to survive, and quickly.

“We anticipate there will be fewer stores with a greater emphasis on click and collect/return.

“Some larger stores may be able to pivot to operate a dual role as retail outlets, and also quasi distribution centres, but for many this will not be possible.”

 

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