Belfast Telegraph

High street troubles hit both high and low ends of market

Opinion

By Donald McFetridge, Independent Retail Analyst

Over the past few weeks we have witnessed a growing catalogue of retail disasters, both locally and nationally. First, there was the news that House of Fraser is to close 31 out of its 59 stores but, thankfully, Belfast was not on the list.

However, House of Fraser is far from out of the woods at this stage and there are likely to be further store closures and job losses in the future.

Its creditors have now approved a Company Voluntary Arrangement which gives the nod to the store closures and rent reductions in other stores.

The problem with department store groups like House of Fraser (and Debenhams) is that they have far too many stores in far too many locations which are very expensive to run.

Retail footfall is decreasing and consumer confidence is weak at the minute.

Add to that the constant threat of online retailing and you have a very challenging situation for even the most accomplished retailers.

Even trading results at John Lewis, once a paragon of retail excellence, have not been particularly good, so it is no wonder that retailers such as House of Fraser have to tighten their belts in what has become an intensely competitive and challenging retail environment.

But it's not just the higher end of the market that is suffering from a lack of consumer confidence and decreasing footfall.

The discounters are also beginning to notice a sea-change in consumer behaviour and spending patterns.

Since the recession, we have increasingly become a nation of discount shoppers and for the past 10 years we have seen a steady rise in the number of 'pound' shops and discount operators.

Therefore, it has come as a bit of a shock to the sector to learn that Poundworld is in trouble.

With a store portfolio of 335 stores (and more than a dozen outlets here in Northern Ireland), the store group struggled to find a buyer.

Partly due to the falling value of the pound and the increased costs involved in importing its merchandise range, it has been struggling to keep the doors of its outlets open.

Now it's gone into administration and is holding 'closing down' sales in its outlets.

Margins are tight in the discount sector and even minor fluctuations in the exchange rate, and a minimal drop in volume of product sold, can lead to a highly significant negative impact on trading performance. In addition to this, discount retailers rely heavily on high volume of turnover in order to be able to afford to offer customers low prices.

This is compounded by lower footfall patterns over the past few months. One of the principal problems facing discount retailers such as Poundworld is the higher cost of imports and another is the dichotomy they face in respect of having to sell the majority of their products at the banner/headline price of £1, irrespective of the price they have had to pay their suppliers.

This leaves little room for manoeuvre.

While House of Fraser looks set to continue trading at Victoria Square in Belfast, N. Brown at CastleCourt appears likely to be pulling down the shutters on its dual-fascia outlet, Simply Be and Jacamo.

This is far from good news for Northern Ireland's consumers and will unfortunately leave another large black hole in what was once a jewel in the crown of Belfast city centre retailing.

In summary - too many retailers have too many stores in too many locations and not enough customers coming through the doors of their outlets.

Add to this the fact that consumers are increasingly attracted to online retailing, and we are confronted with a problem which is only going to get much, much worse in the days and months to come. Challenging times lie ahead for even the most sophisticated retail operators.

Belfast Telegraph

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