High street retailers are risking their survival by failing to cut back on stores. Retail management is stuck with an outdated focus on shop numbers, barring them from downsizing enough to cope with the continuing shift to online shopping, according to a leading property expert.
Hugo Clark of Deloitte's warns in a report published today that retailers must invest spare cash into negotiating 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 the firm warned that four out of 10 shops will have to shut in the next five years as consumers turn their backs on traditional stores in favour of online shopping. By the time online sales mature, large amounts of physical retail space will be obsolete.
But if chains fail to tackle the issue of excess physical space before then, they may be forced to downsize with catastrophic financial consequences, warned Mr Clark.
"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."Reuse content