Downsize while you have the choice, chains urged

Click to follow

High Street retailers are risking their survival by failing to close underperforming stores. Retail management is accused of being stuck with an outdated focus on shop numbers, barring chains from downsizing enough to cope with the continuing shift to online shopping.

Hugo Clark, a property expert at Deloitte, warns in a report published today that retailers must invest spare cash into negotiating the surrender of their poorest-performing stores.

"This is unlikely to be cheap, but it may prove to be a good long-term investment," he said. "Reducing portfolios is not easy but the mistake that many retailers make is waiting until the 11th hour to rightsize their portfolio, when cash to support lease surrenders is not available."

Earlier this year Deloitte warned that four out of 10 shops would have to shut in the next five years as consumers turned their backs on traditional stores in favour of online shopping. By the time online sales matured, large amounts of physical retail space would be obsolete.

But Mr Clark said if chains failed to tackle the issue of excess physical space before then, they could be forced to downsize with catastrophic financial consequences.

"Many retailers who don't manage this approach proactively only consider consolidating their store portfolio under the shadow of a refinancing operation," he said.

"The biggest challenge facing retailers is to continually test and challenge their store portfolios. This is likely to be a constant but critical process of evolution for retailers seeking not just to survive but to flourish."

He said the death of the high street was far from being a reality, but stores were now just one part of a larger, more connected customer experience. "Many retailers are struggling to define the relevance and future contribution of their physical space," Mr Clark said.

He warned that shops now represented "a potentially clumsy, fixed point in an increasingly mobile world".

Comments