The Big Question: Does the high street have a future, and if so what shape will it take?
Friday 28 November 2008
Why are we asking this now?
Woolworths, which many years ago was the biggest chain store on the British high street, has put its retail and distribution businesses into administration. It will carry on trading until Christmas but, after that, its 30,000 staff and 815 stores face an uncertain fate. It is by far the biggest collapse of a UK retail business for many years. The Government was worried enough to call in Woolworths' creditors for last-minute talks but could not save the business. Other chains fear that if Woolworths' stock is sold off cheap in a pre-Christmas fire sale, they too will experience severe problems. At the same time, Britain's biggest furniture retailer, MFI, has also collapsed into administration, putting another 1,000 jobs or more at risk. Its 111 stores are expected to hold closing down sales.
What is the history of Woolworths?
Frank Woolworth, a farmer's son, opened his first successful store in Pennsylvania in 1879 and expanded to Britain by opening FW Woolworth and Company in Church Street, Liverpool, in 1909. It sold clothes, toys, stationery and pick-and-mix sweets. His philosophy was "pile 'em high and sell 'em cheap". Nothing cost more than sixpence, a rule that lasted until the Second World War. The business was so successful that Woolworth's granddaughter, Barbara Hutton, inherited $50m ($1bn in today's money) when she was 21 – and spent the lot. However, the company's domination of our high streets waned when shoppers could afford to pay more for better quality products. The last US store closed in 1997. Woolworths Group plc floated on the London Stock Exchange in 2001. Its shares peaked at 55p in 2005 but have been falling since.
Why has this collapse happened now?
Woolworths is the biggest high-street casualty of the current recession, but not by any means the only one. Many of small chains have closed because people are being cautious and holding on to their money instead of spending it. Along high streets, you see shops trying to entice customers with the sort of cut-price bargains you would normally expect to see after Christmas, not in November. Marks and Spencer, John Lewis and House of Fraser have all cut their prices. In recent years, Woolworths made 90 per cent of its profits in the six weeks before Christmas and broke even for the rest of the year. One bad Christmas and it was done for.
How bad is the retail sector this Christmas?
Last week, the Office for National Statistics came out with a surprise figure: by its calculations, retail sales fell by only 1 per cent in October. This calculation was skewed by the weight attached to sales of food, which had gone up, while sales of household goods and clothing fell. The figure surprised people in the retail trade, who thought the ONS had understated the problem. Synovate Retail Performance, a leading market analyst, has forecast that the number of trips made to the shops next month, other than to buy food, will be a "very significant" 7.3 per cent fewer than in December 2007, despite the cut in VAT and other budget measures.
Karl McKeever, the brands director of the retail consultancy Visual Thinking, agreed that shops were in for a "stiff time" but said the eventual outcome might improve the look of high streets. "After the period of contraction there is a period of opportunity," he said. "This could prise open the door for smaller shops offering greater diversity, so that we'll start moving away from this clone town high street we have got used to."
Who is doing well in the current climate?
When people are reluctant to spend money, any shop that sells essentials more cheaply than its competitors is at an advantage. Until recently, the German discount stores Aldi and Lidl, which keep prices low partly by hiring fewer staff than rivals, were seen rather as downmarket places for the less well-off or the tight-fisted. But in the past year, because of the rise in food prices, the number of people from the social category AB shopping there has risen noticeably, and they now comprise a fifth of Aldi's customers. Discount stores account for about 5 per cent of grocery sales, compared with Tesco's 30 per cent, but Tony Baines, Aldi's UK managing director, thinks its combined share could grow to 20 per cent.
What effect has the internet had on sales?
Another big growth area, which is making life harder for high streets, is online shopping. Ordering your weekly groceries over the internet is no longer the novelty that it was less than a decade ago, and has become a popular time-saver. And it is by no means the only technological innovation that could change the way we shop. A survey by the market research company, TNS, suggested that British shoppers are open to the idea of payment using by biometric fingerprints, in which you pay for goods by putting your finger or thumb on a sensor that reads your print, links it to your bank account and pays for your goods without you having to leave home. There are many other possibilities, such as having an intelligent fridge which monitors what you are using and draws up a shopping list. Buying clothes could also become a very different experience.
What will tomorrow's clothes shops look like?
That tiresome business of going into a cubicle to try on something which then does not fit, so that you have to go and look for a sales assistant who has since vanished, could become a thing of the past. A small number of exclusive outlets are using three-dimensional body scanners to make sure that clothes fit. A more popular notion with British shoppers is having a digital touch-screen in the changing room, so that you can talk to an assistant. Those surveyed by TNS also liked the idea of an interactive dressing room "mirror", which looks like a mirror but is actually a digital screen on to which holographic images of clothes can be projected. This would enable you can see what you would like in that new suit without actually trying it on.
Is it the beginning of the end for the traditional British high street?
Warnings of the imminent death of the high street have been heard before. In the 1980s, the big threat was shopping malls; in the 1990s, it was out of town supermarkets such as Tesco; this time it is the combination of recession and the internet. But Mr McKeever is confident that shopping as we know it will survive, because human nature demands it.
"We are a social species and, love it or hate it, retail does provide a form of social contact," he said. "The psyche of shopping will ring out. I believe the activity of shopping in shops will remain, although there are going to be continuing structural changes."
What else might hurt the high street in the coming years?
Sadly, shoplifting is on the increase, undercutting retailers' profit margins even further. Not only is there more of it, but people are stealing different items. Previously they went for alcohol or other commodities that they did not need but wanted anyway. Now, the theft of baby food is on the way up, according to Catherine Bowen, the head of crime policy at the Retail Trade Consortium.
Will the British shopping experience ever be the same?
* While there will be some casualties, nearly all the famous high street chains will get through the recession
* The disappearance of Woolworths and a few other brands will open up opportunities for others when trade eventually picks up
* People love to shop because it is a part of human nature our nature
* Increasing numbers of people will save themselves a dull trip to the supermarket by shopping online
* The internet is also creating online shopping communities with collective buying power
* Shops will have to become less clone-like and more original to draw in the customers of the future
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