This Monday, 4th July, is Independent’s Day. No, that is not a misprint. Shoppers are being encouraged by the British Independent Retailers Association to buy at least one item from a local retailer and celebrate diversity on the high street. A laudable aim and one that I hope the public will take note of and support.
As the sainted Robert Peston points out in his BBC blog, high street struggles are not just a problem for the shops themselves. Retail landlords are facing the prospect of rapidly emptying properties and downward rent pressures. And that is before any interest rate increases kick in. It is hard to feel too sorry for landlords given the experiences that many retailers had with them during the good times. But there is an awful lot of bank capital tied up in retail development loans and a significant level of default on these loans will once again cast a cloud over the efforts to get banks lending to support economic growth.
Some will say that high street decline was inevitable given the inexorable rise of the internet over the past decade. But even the supremacy of the internet is not a given. Recent stories tell of a reaction by consumers against online grocery shopping. Shopping remains as much an emotional and sensory experience as a technical and economic one.
Also much has been made of the impact of the VAT increase at the start of the year. However I am not convinced. The VAT cut in 2008 made little real difference given the level of discounting that was taking place at that time and I suspect that other macro-economic inflationary pressures in the economy have had more impact that the increase itself.
Having clients in the retail sector has given me an element of insight into the current situation, and I can say that it is not all gloom and doom. Sure it is tough out there but strong brands who connect with customers are continuing to develop and invest in their businesses. Asda CFOJudith McKenna has suggested that retailers can play their own role in improving consumer confidence. The term “winners and losers” is made for the retail industry at present.
However the downturn in business facing many bricks and mortar retailers will not go away. And as stated above it is not just a problem for those retailers and their landlords, greedy or otherwise. It is a problem for everybody involved in the chain of supply. Indeed it is a problem for everybody that likes to “go out shopping”.
No industry has a divine right to survive, and there are plenty of good retailers doing the right things and continuing to thrive. The challenge remains for everybody involved in the industry to look at the way they do things and adapt. And perhaps occasionally for the public to realise that vibrant high streets are actually worth preserving and paying for.