Retailers Urged To Cut Stores and Move Online

The country's major retailers are risking their businesses by keeping too many stores open and failing to keep pace with the digital age, according to a report.

Professional services group Deloitte suggests firms should be reducing their number of shops.

It found a "barnacle effect" - a focus on preserving sales volumes and store numbers - was holding companies back from getting rid of retail space.

It estimated that online sales already account for the equivalent of more than 60 million square feet of retail space and could increase significantly, potentially rendering large amounts of space obsolete.

Earlier this year, Deloitte forecast that some retailers would need to downsize portfolios by as much as 40% as the digital age drove fundamental structural change in the sector.

The report was released just hours before discount fashion chain Primark forecast a 17% jump in full year sales figures - driven by an increase in selling space.

The company, which expects to have opened 19 new stores by the end of its financial year, predicted 3% growth in sales on a like-for-like basis.

Primark said it would have added almost a million square feet of selling space over the 12 months.
Hugo Clark, director in Deloitte's real estate team and report author, told Sky News: "We're in the middle of a bit of a perfect storm.

"We've got a combination of the squeezed consumer ... and the growth and emergence of online sales which is taking sales away from physical bricks and mortar."

Deloitte said the perceived 'death of the high street' was far from a reality in the wake of figures highlighting an average national shop vacancy rate of 14.6%.

Malcolm Pinkerton, senior analyst at Planet Retail, told Sky News that the shift away from physical space was not for everyone.

He said: "The transference of spend online has led to the need for fewer stores, located in premium locations with a compelling shopping environment. Retailers have been handing back space to landlords, scaling back expansion plans and withdrawing from secondary locations for some time now as they adapt to the impact of the internet.

"While the need for a plethora of stores on every high street is no longer necessary for most, stores are integral to appeasing the demands of multi-channel shoppers. Many retailers are exploiting their store networks for services such as click & collect, while others are opening stores that integrate online and mobile technology to facilitate modern shopping habits."

He continued: "Moreover, withdrawing from the high street is not for everyone. The discount model does not lend itself well to the internet. Primark for example, whose low price point and fast fashion model would struggle to work online, is exploiting a favourable retail property market to expand – with great success.”