Analysis: Why is Debenhams closing 50 stores?
PUBLISHED: 11:01 25 October 2018 | UPDATED: 15:29 25 October 2018
© ARCHANT NORFOLK 2009
The fate of Debenhams is just the latest chapter in a story that has been playing out up and down the high street in recent years, writes business editor Mark Shields.
The fate of Debenhams is just the latest chapter in a story that has been playing out up and down the high street over the past year.
News that the retail stalwart wants to close nearly a third of its store portfolio over the next five years underlines the huge pressures on retailers to cut their costs in a bid to survive.
Already in 2018, House of Fraser has been through an administration, Marks and Spencer has announced 100 stores closures, Toys R Us has shut up shop for good, Mothercare has announced it will cut branches, and John Lewis has seen profits fall by 99%.
All are battling a toxic mix of rising costs, in both staffing and raw materials, an increase in business rates, hefty long-term rents, a softening in consumer confidence and – the big one – the increasing convenience of online shopping.
In September, when John Lewis announced its first-half pre-tax profit had fallen to £1.2m from £83m just a year earlier, its chairman Charlie Mayfield said competition had become fiercer with gross margin squeezed in “the most promotional market we’ve seen in almost a decade”.
Faced with that challenge, the response from the high street has been to pin its hopes on one word: experience.
In short, that means offering shoppers something they can’t get by sitting on their sofa browsing on their iPad.
It’s why Debenhams’ new flagship store-of-the-future in Watford features a gin bar, free personal shopper service and a beauty hall taking up nearly one-sixth of the floor space.
Norfolk’s own department store, Jarrold, has splashed out on a deli wine bar and a new restaurant in its basement, and says it is already seeing the benefits in footfall and increasing shopper spend.
The investment is aimed at creating stores that offer multiple attractions in one place – self-contained destinations where you can get your hair done, eat brunch with friends, shop with them and then have a glass of wine to relax at the end of it all.
But it is also combined with investment from the big department stores investing heavily in their e-commerce offering, whether that be direct online sales or click and collect service. It is simply not possible to ignore that channel any longer.
But the evolution of the department store into flagship destination means that there are likely to be fewer of them – they will be expected to have the services that draw shoppers from further afield, so there will be no need to have one in every town.
The huge rents and rates bills for bricks-and-mortar stores mean that chains are now weighing each one carefully to make sure its pays its way.
For that reason, major regional shopping destinations such as Norwich are likely to remain attractive locations – and it may be in smaller towns with lesser pulling power that the impact of the changes reshaping the high street will be seen most starkly.