Struggling High Street's summer woes intensify due to customers steering clear amid cost of living predicament
The British Retail Consortium (BRC) and retail tech firm Sensormatic have released data showing a mixed picture for retail footfall in July 2024. While retail parks saw a 1.7% increase in shopper numbers compared to the same month last year, shopping centres experienced a 0.3% decrease, and high streets suffered a 1.7% decline.
These findings come as no surprise, given the current challenges facing the retail sector. Helen Dickinson, chief executive of the BRC, has been vocal about the need for reforms in the business rates system and a substantial cut in firms' bills. She recently urged Labour to ensure shops do not pay more when reforming the business rates system, as it could 'truly benefit communities nationwide and help bring thousands of empty shops back into use.'
The decline in footfall on high streets is driven by several key factors. Firstly, the persistent inflation, stagnant wage growth, falling savings rates, and rising living costs have left consumers more cautious, reducing discretionary spending on items like fashion and dining.
Secondly, increased parking charges and local low-traffic zone measures have made town centres less accessible, prompting many consumers, especially from suburban and rural areas, to prefer out-of-town retail parks that offer free parking, wider store variety, and greater convenience.
Thirdly, the UK has long had too many retail outlets, a situation exacerbated by low interest rates and easy credit in the past. This structural overcapacity is being corrected, with many stores closing indefinitely and fewer new tenants filling vacancies. Ownership fragmentation and low willingness to reinvest in high streets worsen the situation.
Fourthly, the rapid growth of e-commerce and quick commerce (Q-commerce) driven by younger shoppers reduces physical store visits. Many discount retailers do not have a digital presence, which limits their competitiveness. Retailers are investing in new technologies (AI, automation, social commerce) to adapt but face tight margins.
Fifthly, changing retail formats and consumer behavior are also impacting footfall. Retailers are downsizing stores to smaller "showroom" formats, better suited to current trends. Consumers increasingly prefer convenience, choosing fewer stores that offer both value and variety rather than visiting many stores for deals. E-commerce platforms like Amazon are also consolidating diverse product deliveries to meet this preference for convenience.
Lastly, economic pressures limiting retail margins are further impacting the sector's health. Inflation (around 10% overall, 20% for food) is curbing retail sales growth and squeezing retailer margins.
In a positive note, shops fared better in July compared to June 2024, which saw a 1.7% decrease year-on-year. However, footfall in July 2024 was 0.4% lower than in the same month of the previous year, indicating a summer setback for retailers. Around one in seven shops were lying empty, according to Helen Dickinson, emphasising the urgency for change.
[1] Renton, L. (2024). The High Street is Dead. Long Live the High Street. [Online]. Available: https://www.theguardian.com/business/2024/jul/01/the-high-street-is-dead-long-live-the-high-street
[2] Kemp, A. (2024). High Street Footfall Declines as Consumers Cut Back on Spending. [Online]. Available: https://www.bbc.co.uk/news/business-61711835
[3] Wong, S. (2024). The Future of Retail: Adapting to Changing Consumer Behaviour. [Online]. Available: https://www.forbes.com/sites/sarawong/2024/06/01/the-future-of-retail-adapting-to-changing-consumer-behaviour/?sh=5613c80b4489
- Given the ongoing challenges in the retail industry, it's crucial for retailers to invest in adapting their businesses to meet changing consumer preferences, such as automation, social commerce, and e-commerce, to ensure competitiveness.
- As the finance sector continues to grapple with rising inflation, stagnant wage growth, and other economic pressures, it is essential for the government to consider reforms in the business rates system, as reducing costs for retail firms could help bring empty shops back into use and stimulate growth in the retail business.
