Our Willy Wonka Chancellor Feeds Us More Fudge On Business Rates

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Six and a half years after promising to reform the UK’s arcane business rates system, Chancellor George Osborne announced some sweeping changes at the Conservative Party conference on Monday.

However, instead of a carefully thought out progressive revision of local business taxation, we had yet more fudge from a Willy Wonka chancellor, eager to impress the party faithful with a plan so fiendish even Blackadder would blush at its audacity.

Currently business rates are levied by central government and collected on its behalf by local authorities who then pass the money to the Treasury. A portion of this is subsequently returned to councils to fund local services. This is the process of the Uniform Business Rate system, or UBR, a scheme instigated by Margaret Thatcher, partly with the intention of evening out disparities between richer and poorer areas of the country and re-distributing that wealth more fairly. Yes, even Maggie was a little bit commie on the quiet.

The problem in recent years though has been that rates have sky-rocketed in line with the rental valuations to which they are inexorably tied. The retail boom in the early part of the new century drove landlords to expect more and more returns on property. With large, heavily-leveraged retail chains eager to stump up ridiculous amounts of rent to be in key locations, the market mushroomed.

red_toryConsequently business rates have generated massive piles of wonga for central government and successive chancellors of every hue haven’t exactly been itching to relinquish the embarrassment of riches they’ve had bestowed on them. Indeed in 2012 alone, £350M was added to the rates liabilities of businesses amidst one of the worst recessions on record. During the last parliament the business rates take ballooned by over £1bn and the situation has been further exacerbated by the arbitrary postponement of the regular 5 yearly rating revaluation which should have taken place this year.

Pressure has therefore been mounting on government from businesses and retail campaigners like myself to do something about the damage this system is wreaking on our local high streets. This reached something of a crescendo prior to the general election, when once again the Conservatives promised that improvements would be made, even though they’d singularly dodged the issue throughout the previous five years.

So it was surprising that there was scant mention of rates in the emergency budget cobbled together by Osborne just after The Conservatives shock victory in May. I think I now we see the reason why. He’s obviously confused his party conference with budget day.

Devolution Illusion

Rather than kick this thorny little ball into the long grass for a few more years, Gorgeous George included in his keynote speech the wizard wheeze of passing the problem back to local councils under the guise of localism. The plan is simply to abolish UBR – the one part of the current regime that actually has any merit – and allow councils to hang on to all the money they collect from local businesses, regardless of the disparity that will result.

Apparently eschewing any further rounds of tokenistic consultation with business leaders, he’s neatly avoided central government having to find a solution to the whole soggy mess. In a move that sounds like it was thought up after a particularly good session in the House of Commons bar, he’s dropped the problem into the lap of local councils and walked away. Bang! Sorted!

However, Osborne’s claims about the benefits of his grand idea show just how staggeringly little he understands about the way the system actually works. Something that’s probably a teeny bit worrying coming from our Chancellor, considering we’re talking about a major plank of our national fiscal structure.

Bold Claims

He claims that giving Local authorities the power to reduce rates will help them attract new businesses to the area. In this bold statement he seems to be lamentably ignorant of the fact that councils have had the power to reduce rates since the Localism Act was introduced by his government in 2011. But like so many of these devolution illusions, giving people the ability to do something doesn’t mean they can actually do it.


He’s dropped the problem into the lap of local councils and walked away. Bang! Sorted!


Most councils struggle on the budgets they have already, any decreases in rates payments have to be taken out of that already dwindling sum and so hardly any have availed themselves of their new powers. Sweeping away the last vestige of Thatcherite socialism will only serve to exacerbate these problems, not make things better.

The Chancellor also seems to be unaware of the fact that empty properties still attract a rates liability. Landlords continue to pay rates on voids with only a small amount of relief in the early stages of a vacancy, so there’s little incentive for councils to reduce rates on empty properties. A problem that I once tried to explain to our erstwhile minister for the high street, Grant Shapps, without much success. It appears that obliviousness to the principles of local taxation goes even higher than I thought. Which explains a lot.

SNN2252GXA-620_1791255aRates will therefore continue to be an unavoidable burden weighing particularly heavily on small retailers, especially as, under Osborne’s new scheme, it appears that central government will still be setting the national levy as it does now. I say ‘appears’ as the details seem to be thin on the ground right now. Perhaps George lost the fag packet he wrote them on somewhere between the conference podium and the bar.

There is some talk about a system of re-distributing funds between richer and poorer councils, but again there are not many specifics beyond the idea that city councils who agree to have an elected mayor will be allowed to impose small additional levies for infrastructure projects, again something they can already do now.

There may be some scope for individual councils to adjust liabilities between different types and levels of business, but without the ability to increase rates on others beyond government limits, that will only work in one direction.

Rich and Poor

Well heeled and over-subscribed areas like London’s West End will reap huge rewards from this new regime, hanging on to far more money than they ever received in government grants. But they’ll have little reason to reduce rates liabilities. They will simply, and sensibly, bank the extra cash for a rainy day.

Meanwhile poorer authorities will continue to languish in the doldrums. After all, why would anyone want to set up business in a depressed area that is destined to become even more dilapidated as council budgets are swept away in the dust of the government’s on-the-hoof policy making?

With the balancing principle of the UBR gone, richer areas will become even richer and the poorer even more impoverished. Most councils will probably just hope that the amount they receive in newly retained rates payments will at least offset the amount that will be missing from their government grant. But in the most desperate areas that’s likely to be a forlorn hope. It’s a quid pro quo where the quids will only be going one way.

If nothing else I suppose Osborne has at least affirmed early on in this parliament that we’ll see just as little meaningful progress on local taxation reform as we did during the last. And while he basks in the glory of grand gesture politics and party political back-slapping, it seems our high streets and local services will have to continue to cope with this government’s ignorance and avoidance of the real issues for at least another 5 years. A prospect I doubt many people will find particularly sweet.

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Are Small Retailers Becoming an Endangered Species?

Cecil_the_lion_in__3388298bThe illegal killing of Cecil the lion has generated many column inches about the protection of endangered species. In an admittedly tangential intellectual leap, I’ve been wondering if we should be adding another dying breed to the danger list – that of the independent retailer.

It seems that just like many animal populations in the wild, retailers who colonise once abandoned areas and make them fruitful again, tend to attract the unwanted attention of bigger game looking for an easy kill.

Currently the country’s richest landowner, the Duke of Westminster is planning to bulldoze a chunk of the Pimlico Road, regardless of the fact that he’ll be rolling the heavy machinery over a raft of long established and successful independent stores.

Unfortunately for them, it’s not enough that the property is earning more than it’s keep and probably appreciating faster than Tracy Emin’s unwashed bed socks. The assets must be sweated, even though they’re already soaked in years of perspiration, squeezed from the brows of those who’s businesses trade from them.

Passport to Pimlico

The Pimlico Road has become a magnet for interior designers and anyone looking for something a little out of the ordinary. The antithesis of what chain stores provide, by their very nature. Yet buoyed, no doubt, by the increased footfall these niche stores have inspired, Grosvenor’s plans are reportedly to develop gargantuan retail units that they believe will be more attractive to larger international brands.


Developers now fish in a gene pool that is becoming progressively more shallow, producing a retail mono-culture where they no longer understand or apparently care about the requirements for smaller operators, except as pop-ups of convenience or a bit of garnish to their main offer, usually in the form of RMUs.


And this isn’t an isolated case. We’ve seen similar changes in character to destinations such as Burlington Arcade, Spitalfeilds and Covent Garden. In central London, galleries in Cork Street and Dover Street have been lost, and even bespoke menswear stores and tailor’s workshops that gave streets like Savile Row their iconic status around the world have been ground under the developer’s heel. While London may be the vanguard for these culls at the moment, it’s a strategy that’s starting to gain ground, literally, around the whole of the UK.

When I entered the high street over 20 years ago, I remember even the most hard nosed property managers being supportive of smaller operators. Not only did they appreciate your staying power, but they saw your business as providing that extra spark and diversity that kept their developments attractive to both consumers and prospective tenants.

Retail SSI

There now seems only to be a headlong pitch towards bigger, brasher and more expensive spaces with scant regard for anything a smaller retailer, let alone a start-up, could occupy. New malls for example now rarely offer spaces small or affordable enough for indies to even contemplate.

Developers now fish in a gene pool that is becoming progressively more shallow, producing a retail mono-culture where they no longer understand or apparently care about the requirements for smaller operators, except as pop-ups of convenience or a bit of garnish to their main offer, usually in the form of RMUs.

protected-species-sign-on-gate-postSo where does that leave the small retailer of the future? If every time a secondary or tertiary location is popularised that’s taken as a cue to erase their existence, where will innovation and verve come from on the high street? Certainly not from the ‘me too’ generation of international brands, over-hyped and over here, rolling out virtually the same products and service models as every other chain store.

Perhaps in the same way that sites of special scientific interest are protected by government statute, we should have sites of special retail interest, where smaller businesses can be shielded from the worst excesses of re-development.And this isn’t just starry eyed idealism. Without space for new entrants into the retail landscape, where will our chain stores and national retailers of the future come from? We can’t expect every successful online business to have a yen for a more physical presence.

In the same way that vulnerable animals need to be protected from the sophisticated firepower of modern hunters, business innovation needs space to breed and expand, outside of what is rapidly becoming a very one sided fight.

Most conservationists will tell you that habitat erosion is one of the largest causes of extinction events. Maybe the world of retail property management also needs to learn that lesson before it’s too late.

This article was also published as one of my regular columns for Retail Week Magazine

Unrealistic Rents Are Risking The Future Of Our High Streets

high-rentThe British Retail Consortium warned recently that a failure to deal with our broken business rates system could have a devastating impact on our economy.

In a stark prediction to the Chancellor, they estimated that up to 80,000 shops could fall empty over the next 2 years, putting 800,000 jobs at risk.

This is based on the assumption that 60% of stores facing lease renewals over the next 2 years may simply walk away from what has become an unsustainable commercial property model in the face of climbing rents and falling sales.

I’ve previously highlighted the perfect storm that is brewing up towards the end of 2015, with 40-50% of commercial leases falling due to for renewal.

The BRC’s predictions may be pessimistic, but there’s every reason to believe that a huge dent could be put in the retail economy very soon. This is especially worrying, considering consumer spending and the associated debt shift to private borrowing is what appears to underpin much of George Osborne’s plans for our economy over the next few years. Likewise many local authorities now rely more heavily on business rates as cuts in central government funding bite even deeper.

I’ve often been critical of the BRC. I see them as an organisation geared heavily towards protecting the big boys in the retail hierarchy, with only the odd glance back down the ladder towards small independents and medium sized chains. But on this occasion I’m in complete agreement with them, although for slightly different reasons.

Rates Burden

Business rates are of course a huge burden on high street operators and an issue that urgently needs to be addressed by the Chancellor – indeed it’s something I rarely tire of saying myself. But this has been the case for at least the last 10 years now.

However all this is largely irrelevant to the overall problem. The main reason why many store leases may lapse at the end of this year has less to do with rates and more to do with the ridiculously out of kilter valuations of the properties themselves.

It’s often conveniently forgotten that business rates are based on historic rent agreements. Many of them made by companies financed by the very same people who also bankroll mall developers and institutional landlords, both of whom have a vested interest in keeping rental expectations unrealistically high.

The driving force behind our inflated rating valuations are the equally avaricious demands by landlords who would rather see a store empty than see it’s theoretical value fall.

Bluff And Deception

Anyone who has had experience of lease renewals over the last 5 or 6 years will tell you that there’s very little sign of pragmatism from landlords or property advisers. Any hopes of the market being reset after the financial crash have long been abandoned.

This is partly down to the way that commercial property has become the vehicle of choice for the disconnected behemoths that are multi-national investment funds, but mainly because most such organisations are hip-deep in the same quagmire of over-leveraged debt that led to the spectacular economic swan dive we all witnessed a few short years ago.

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There has long been a fragile framework of bluff and deception underlying the retail property market. More than any other commercial property transaction, store leases and rents are teetering on the edge of an abyss created by property advisers and fund managers who simply refuse to give any quarter to such mundanities as fiscal viability or long term tenant relationships.

The general principle seems to be that as long as they can keep the music playing, no one ever has to count the empty seats. The problem now of course is that a raft of impending lease expiries means there may soon be a lot more chairs and a lot less people willing to play the game.


The driving force behind our inflated rating valuations are the equally avaricious demands by landlords who would rather see a store empty than see it’s theoretical value fall.


There was nothing tangible in the recent budget about business rates reform, and that’s something that we must continue to demand from a government that has been consistently phlegmatic about, despite promises of action.  But that’s now only half the story. Without effective commercial rent and lease control, or some voluntary injection of common sense into the equation, these other costs will simply expand to fill the vacuum created by any reduction in the rates bill.

If we’re going to avoid thousands more empty stores and hundreds of thousand of lost jobs, we need a comprehensive review of the entire bricks and mortar proposition. In the meantime property taxation will only be a part of any retailers decision to stay or walk away.

Hope or Hype? – Why I Never Trust Economic Reports

Economic reports seem to be like buses. You wait for ages and then four turn up at once.  Last week they seemed to leave the depot together, all promising to take us somewhere nice for the summer.

Nielsen’s report on consumer confidence was the first to pull up to the kerb with figures that seem to back up those released last month by GFK. Both showed consumers looking at the high street with a more optimistic gaze, with Neilsen putting consumer confidence at a 9 year high as opposed to GFK’s more buoyant outlook of a 13 year peak.

Then came the CBI’s quarterly Distributive Trades Survey – a measure I’ve never been particularly impressed by – reporting expectations for June riding on a 27 year high, although in reality orders were only growing at their fastest pace since 2010.

Footfall monitoring company Springboard also announced footfall on the high street over the bank holiday weekend eclipsed that of shopping malls with an increase of 4.4% as opposed to an almost equal drop in retail parks and shopping centres.

Finally Asda’s income tracker proclaimed that us lucky Brits now have around £17 a week more in our eager mitts than we did this time last year.

Rosy View

If we’re to believe these statistics, high street store operators can at last cast the rose tinted spectacles from their reddened eyes and peer at the horizon with renewed hope. We now just have to for wait for those armies of revitalised shoppers to beat down our doors with fists so full of cash we’ll barely be able to fit it all into dusty till drawers previously inhabited only by moths and a few dog-eared copies of the last set of reports that promised us roughly the same thing a few months ago.

You might guess from my barely disguised flippancy that I don’t personally put a great deal of store by these reports. And you’d probably be right.

Nielsen’s epistle for example was carried out using a sample of respondents from online shoppers. A group who are already looking to buy (or why are they on the internet being asked about shopping?) so will naturally be pre-disposed to making a purchase.

The CBI’s survey is a constant source of bemusement to me, and many of my own suppliers that I have conversations with. They appear to have their heads in much loftier clouds than most of us, being twice removed from the actual consumer transaction. In my mind the impact on the high street of an estimate about probable orders is tenuous at best, and has been proved to be such on many previous occasions.

In terms of footfall I’d say that Springboard are one of the more accurate companies out there, but a broad headcount usually leaves me shrugging my shoulders, as such a number isn’t much use without the associated conversion data.

Wet Seaweed

Income trackers are the statistical equivalent of the wet seaweed barometer, based as they are on a set of constantly fluctuating, notional measures. And in the end is a figure like £17 a week really going to make that much difference to the behaviour of the average consumer? Not if other analyses are to be believed which suggest that people are more likely to remain in their current pre-programmed behavioural loop of saving more and spending less after being ingrained with fiscal paranoia for the past 7 years.lf-WeatherRock

And to a large extent those people are right. There are so many factors in the shifting economic landscape right now that basing any predictions, let alone business decisions, on these sorts of analyses would be somewhat precarious.

This was neatly demonstrated on Friday when the comparison between Neilsen’s and GFK’s figures seemingly evaporated after GFK released new numbers showing consumer confidence fell to a 5 month low in May, ostensibly dented by uncertainty surrounding the General Election.  And as the pollsters showed us in that election, predicting outcomes based on what people tell you in surveys is a very tricky business.

Optimism Vs Realism

I’m all for a bit of optimism, but it seems like we rarely have realism in terms our business expectation these days. A few years ago I was bemoaning a similar level of ill-founded pessimism as being the harbinger of more doom and gloom than was healthy.  I’m equally sceptical about skeins of upbeat predictions.  Is a happy medium too much to ask for?

With rent and rates still at record levels and unrealistically low interest rates just waiting to be let off the leash, I think a healthy sprinkling of caution needs to be infused into any ideBus_Twitas that we’re about to see a renaissance in high street retail.

I could be wrong. In fact I hope I am, but in the end the only reliable statistic for a business is that figure on the bottom of your profit and loss account.

Personally I’d prefer to see what’s in the emergency budget before I invest in any bunting. Or maybe wait for the next report to see what that has on board. And just like the Clapham omnibus, I’m sure there’ll be another one along any minute.

This article was also published online as one of my regular columns for Retail Week Magazine

 

Who Really Foots The Bill For Christmas Markets?

Christmas Markets

‘Twas the fortnight before Christmas and all through the town, retailers looked forward to one of those rare periods when turnover outstrips overheads and that wolf at the door finally takes a well deserved holiday.

Except that expectant buzz in the streets and malls of old England has in recent years been supplanted by the sound of lorries dumping small wooden structures in what were once the jealously guarded open spaces of the retail heartland.

Ahats-crowdre these timber toadstools some sign of an impending gardening expo? Are they perhaps a portentous re-appearance of the wooden henges worshipped by our prehistoric ancestors? Were they dropped in by pipe smoking, flat cap wearing aliens as part of some elaborate shed-snatching invasion of old duffers?

No. It’s just the make-believe Bavarian market is here again!

Yes, that great British tradition, as ancient as flat screen TVs, is once more being rolled out in virtually every town from Penzance to Perth. City centres and shopping malls are rammed to the rafters with tongue and groove grottos selling food, fashion, jewellery, knitwear and all manner of consumer goodies, just in time to take advantage of the busiest time of the year.

And to prove their authenticity, there’s even a bloke in lederhosen proffering a cremated sausage in a bun. What’s the wurst that could happen?

Oddly enough for most of the permanent stores around the same area, it already has. You see, they were also rather hoping to be able to tap into this festive bonanza themselves. They’d all spent the rest of the year keeping the towns and malls thriving, paying their rent and rates through thick and (mostly) thin, waiting for those precious few weeks when they’ll reap the benefits of this hard work with anything upwards of 40% of their annual turnover.

It’s a shame then that the only acknowledgement of the year-round commitment of regular traders is to have their carefully crafted Christmas themed window displays buried behind acres of cheap garden furniture, housing fair-weather traders focussed on cashing in on the very same goodwill they’ve spent all year building up.

For the most part there’s abject indifference from the perpetrators of these events to the impact they have on trade for everyone else. The rationale of local councils and mall operators seems to be that permanent retailers are already on the hook for rent and rates, so there’s no immediate reason to consider their position when there’s yet more easy lucre to be prised out of a few temporary traders. And at around £150 a day, that’s a lot of Christmas cheer for someone’s balance sheet.

Space Invaders

Besides the be-hutted markets, there’s also an annual boom in the provision of the prosaically named ‘Retail Merchandising Units’ – Or ‘market stalls’ as anyone outside the industry would call them – in the otherwise neutral space that was carefully designed by expensive architects into most modern malls. Again these are mostly populated by people that sit out the rest of the year safe from pesky things like overheads, during periods when there aren’t hordes of customers throwing cash at them.

Oval-RMUNot that I have anything against market traders. I was one myself for 7 years before starting my high street chain. But even then I traded all year round, wiping the snow off my pitch in February and standing in the freezing wind and rain to make less money than my stall was costing me. But in those days there was a proper acknowledgement that you’d paid your dues. You got the pick of the best pitches before the seasonal traders got a look in, and you knew your contribution to the annual ambience was valued.

And these ‘parachuted in’ seasonal markets have just as much of an impact on the existing street and market traders, as they’re often run by promotions companies with no connection to the local market management and so little interest in keeping regular traders on side.

There is of course the argument that these events bring in custom who will then shop with the regular traders. Personally I think that’s about as logical as suggesting cheap bootleg DVDs will increase the sales of cinema tickets. I know from my own experience this year, trading in a department store in close proximity to one of these markets, that business has been negatively impacted. And it’s this way every year.

Spread The Good Cheer

The most galling thing for local businesses is that they have no control over the location or the timing of these events. All forward planning for pre-Christmas promotions can be totally undermined by the arrival of these shanty shops.

Isn’t it about time mall landlords and local authorities started to consider the people that help pay their wages for 11 months of the year, instead of how to make a quick buck off those that they only see when Santa’s grotto is wheeled out of the storage cupboard?

Christmas markets have their place. But that isn’t slap bang in the middle of already existing trading areas where hard grafting retailers have spent all year creating the good will these events feed off.  (Or is it?  Register your vote in the poll below)

Dan-Aykroyd-in-Trading-Pl-007Let them have their own space in locations not already well served with long term retailers who need the Christmas rush to make ends meet. Or at the very least ensure that the various offers don’t compete with existing traders. Just because it’s only for a couple of weeks, that shouldn’t mean tenant mix policy should be ignored. Like all other traders in mixed developments, they need to ensure that Santa Claus sticks to his user clause.

Better still, involve the permanent retail community in these events. The planning for these markets often starts in the early part of the year, just at the point when most regular retailers start to feel the cold winds of post-Christmas reality blow away that warm glow of the previous few weeks. So if landlords and councils really want to engage with their retail community, now is the time to think about it. Not in the run up to what should be the busiest trading periods of the year.

Perhaps offer special deals to stores that might also want to take a stall. Organise bounce-back promotions to bring customers back to the area in January. Think about pre-Christmas events that could boost trade in the high street before the shed traders arrive. At the very least make sure that there won’t be a clash of priorities on important dates. In short, value your long term stores as more than set dressing for a seasonal smash and grab.

Remember that for many people shopkeeping is for life, not just for Christmas.

Have a happy and profitable 2015 everyone!

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Phones 4U – The Winners And Losers

phones 4UThe announcement by Phones 4u’s administrator Price Waterhouse Coopers that it is closing 362 of the retailer’s stores permanently really is an appalling outcome for the 1697 store staff who now find themselves out of a job.

I feel very sorry for these people at the sharp end of what seems on the face of it to be a rather sordid tale. I know from speaking to some of the employees that most had absolutely no idea that their jobs were balanced on such a knife edge, and from what I understand from other reports, senior management had little inkling either.

Perhaps they should have had though. Certainly the company’s main investors could have shown a little more sensitivity to the likely outcome of negotiations with the four main carriers when they explained that they weren’t able to offer competitive terms in the face of a mountain of debt that needed to be serviced. Especially as a good deal of that debt was apparently self imposed as a result of some rather creative financial arrangements.

Equally Vodafone and EE should perhaps have considered the impression their actions would give to their own customers when they, fairly unceremoniously, pulled the rug from under a long-term business partner. Perhaps they weren’t prepared for Phones 4U management to take such drastic action. I know I was personally flabbergasted at how easily they appeared to give up the fight when the Vodafone contract had another 6 months left to run and EE’s wasn’t due to expire for a further year.

Most businesses would have kept trading and explored other possibilities, probably including some hasty re-trenching and fence mending with all the carriers. Of course I’m not privy to all the reasons for their decision to go into administration so eagerly, but it seems to me that a business with over a billion pound turnover and profits in excess of £100M might have been worth a little more effort than a press of the nuclear button without further attempts at diplomacy. I’ve certainly seen many much smaller businesses struggle to stay afloat for a lot longer than these guys.

Easy Money

Maybe that’s the problem. For those companies already staked in the game, the mobile phone business has been seen for some time as easy money. The phones and tariffs are laid on by other companies and an obliging public pitches up every time one or the other produces another subtle flavour of hardware or call package that in essence does the same thing as the last, only slightly better. These carefully stage managed increments keep the punters hooked and the cash rolling in. Perhaps when things got a little tougher than that for the board, it’s just wasn’t worth the trouble.

Now the very same carriers that precipitated this situation are reportedly picking off the juicier fruit from the P4U property cherry bowl for their own standalone stores. After an epiphany, undoubtedly born of the internet, they’ve discovered that cutting out the middle men means the money tree just grew a bit taller.

It’ll be interesting to see if tariffs are reduced accordingly now there’s one less bite out of the pie. But somehow I doubt it, especially as most of the carriers have of late been furiously re-writing their contracts in ways that haven’t been particularly advantageous to their customers. And let’s not forget that, with a reduction in competition on the high street, the consumer is going to have less opportunity shop around. As the carriers take more of a direct sales approach, the choice will be limited to service and coverage rather than tariff with fewer independent resellers to stir the pot.

I suppose grabbing the tastier morsels of the Phones 4 U portfolio is a pragmatic move, but it still looks like opportunism born of fancy footwork on their part. In the final analysis the people who have, justifiably or not, pulled the plug are now picking over the bones of a business that previously appeared to be thriving.

A Dream Outcome For Dixons Carphone

Dixons Carphone don’t come out of this smelling like roses either, even though I suppose they can’t be held accountable for the actions of their own suppliers, it does look like a superlative bit of luck on their part that shortly after announcing the closure of 160 Phones 4U concessions in their Currys stores, their main competitor loses all support from their mutual partners. I’m not suggesting there was any collusion involved, but it does seem like the kind of dream outcome that many a rival company would have to pinch themselves hard to believe.

To be fair, Dixons have offered jobs to many of the former concessions staff, which does of course also provide them with a ready made workforce. They’ve also been making efforts to acquire a number of the Phones 4U locations and have been promising jobs for the staff involved in those locations. However it’s understood that the administrators have been less than enthusiastic, so one can only speculate as to the kinds of offers Dixons Carphone are making for the properties. Dixons taking over the stores could of course safeguard of a number of jobs, but they still stand to gain a lot out of the deal themselves.

bad smellThere were undoubtedly a lot of contributory circumstances leading up to this meltdown, but it still leaves a very nasty taste in my mouth and a hell of a stink under my nose. A ludicrous situation and a sad outcome that could have been avoided at so many key points. I only hope all parties concerned, including the P4U investors and management, the carriers, and Dixons Carphone are as uncomfortable about all this as I am.

Although I doubt any of us will be as uncomfortable as the store staff and their families who suddenly find themselves without an income so close to Christmas.

Pressing The Reset Button On The Commercial Property Market

reset-przyciskI have this annoying habit of confusing two recently formed organisations.

Firstly there’s the Future High Street Summit, set up by high street campaigner Clare Rayner to bring together experts and activists concerned about the state of the great British town centre. It currently takes the form of a conference, open to anyone, but especially grassroots imagineers looking to contribute to process of re-building communities around a social and commercial hub.

Then we have The Future High Street Forum, set up by the government, supposedly to build on the work of the 2012 Mary Portas review. They have a smattering of academics and some fringe involvement from trade bodies, but largely it’s composed of vested interests, property investors, large corporate retailers and politicians appointed by a government department with no readily apparent clue about what is actually needed to deal with the problems in our town centres.

As you may be able to tell, even though they have similar names, there is a big difference between the aims and achievements of both bodies. I was fortunate enough to be invited to the first Future High Street Summit earlier this year and found it a very interesting experience. Rather fittingly held in the futuristic environs of the National Space centre in Leicester, it comprised of two days of speakers, discussion groups and networking opportunities.

A number of knowledgeable speakers shared experiences and insights over the two days I was there. Some I agreed with, some I didn’t. But overall there was a good cross-section of exemplars and I’d imagine everyone found something to inform their own activities and responsibilities. I certainly enjoyed the networking sections, chatting with people I already knew and making a few new acquaintances, some of which I’m still in touch with.

Where’s Brandon?

One notable absence though was the then Minister for High Streets, Brandon Lewis. He’d been billed as a speaker for some months, and having missed my opportunity to fire a question or two at him at his whistle stop visit to Retail Week Live conference a few weeks earlier, I was looking forward to getting a second chance in Leicester.

Brandon-Lewis_2886856bSadly though, at the last minute he discovered he had to somewhere else to be on that day. An important matter of state perhaps, or maybe it was just his turn to polish the Westminster cat. I remember checking his Twitter feed on the day to find out what could have been so important for him to break such a long standing engagement. I can’t remember it being anything earth shatteringly important. Certainly not as important as a conference bringing together people to discuss options for the very thing he was supposed to be responsible for at the time. Perhaps, like me, he got the two similarly named organisations mixed up and only realised his mistake at the last minute. That might have been an embarrassing admission for him, considering he was the chair of the government forum.

Whatever the reason the DCLG sent along a polished civil servant stand-in to read a prepared speech in impressive cut-glass tones. Rather more of a political treatise than an engaging presentation, it sounded like a lecture he’d already given a dozen times to the politically faithful. The questions piled up on my notepad, poised for moment when he would finally shut up. But, as his boss had done a few weeks before, he scuttled off with no time for in depth discussion of government policy. In the final analysis, perhaps the lack of engagement with attendees on both occasions speaks volumes about the government’s genuine attitude towards the issues.

We’re All Forum

Over the past year or so we’ve had a number of announcements from the Future High Streets Forum. Last year Government Minister Nick Boles suggested that hard to let stores could be re-tasked as residential properties, thus neatly erasing the problem of abandoned high streets and giving property developers free reign to make a lot of money out of the plight of inner cities.

No matter that the Forum was set up to help get these areas back into retail and other community uses. Let’s just solve the problem of over-rented, over-rated retail locations by turning them into luxury pied de terres. In one fell swoop this would provide hope to perfidious landlords who’ve backed themselves into a corner with fantasy loan to asset values and reduce the pool of available retail properties, thus inflating the market even more.

Their latest wheeze yet again involves the property hue of their spectrum of responsibility. A joint announcement from the Forum and the British Property Federation set out a plan for what Liz Peace of the BPF called a ‘collective ownership scheme’. The driving principle being that the disparate nature of property ownership on our high streets didn’t lend itself to the same sorts of controls available to the operators of shopping malls. Unusually for me, I agreed with Liz on this point. We do need curation on the high street. So many towns now are clogged up with the same usual suspect operators. from the ubiquitous mobile phone stores to the omnipresent coffee bars, many high streets are just plain boring.

Attack Of The Clones

The principle of the clone town is not new. It was identified some years ago and the phrase has long since slipped into the national lexicon, in many cases without much concern for what it actually means. Shopping centres have been quick to capitalise on this phenomenon and have applied fairly rigid tenant mix policies within their specific fiefdoms. I say ‘fairly’ rigid as it’s not unheard of for a big bucks offer to banish all concerns over duplicate use. You only have to look at Covent Garden and count the number of multinational perfume and body products brands selling virtually the same thing to see that.

p1060068-480x321But this more ordered approach to the shopping experience has paid dividends for mall operators and their tenants so it’s sensible that the idea should be applied to the high street. Of course the stumbling block is still the fractured nature of property ownership. Ultimately each landlord is more concerned with getting the best deal from a tenant, regardless of the type of use. What do they care if there’s already 6 other mobile phone store in town. If number 7 is prepared to a ludicrously speculative rent they’ll take their money.

The BPF’s solution to this is a system whereby landlords would pool resources and agree a common lettings policy. In one model being proposed they would each have shares in an overall property portfolio, shifting the focus away from individual lettings to a more holistic trading environment.

Curated High Streets

The idea of a curated high street is something I’ve long championed. But I’ve always proposed controls via more detailed planning laws. Instead of broad brush usage classes being factored into local plans, I’d have specific operator types defined by an elected team of high street managers, drawn from various parts of the property spheres. Town planners, local retail groups, landlords, property advisers and local consultants, maybe something like the town teams we already have, but with more accountability. There would be zoned areas within a well defined tenant mix policy which any new tenancy would have to comply with. This would prevent disconnected property interests simply chasing the money, regardless of duplicated use.

Of course this is something that could be handled by a self regulated body of property owners, but there would be a risk that vested interests could ultimately over-ride the what’s best for the local trading environment. Even if the income from these property groups was pooled by way of a shareholding collective, as suggested in one proposal from the BPF, There would always be potential for larger shareholders to dominate the group. And as I’ve described above, self regulation becomes rather malleable when there’s enough money on the table.

The other danger that I see from allowing such a collaboration between property managers is the possibility of terms fixing. Rents and other leasing policy issues could easily become entrenched, leaving tenants little room for negotiation in a target area. Instead of dealing with one landlord, they’d be dealing with a cabal. Lease negotiations are already skewed enough in favour of the landlords. We don’t want to be fomenting conditions for the construction of a cartel in all but name.

The Big Idea

Fellow town centre campaigner Dan Thompson and I have recently been kicking about a more radical solution to the problem of restrictive practices on the high street. We’ve posited the idea that empty properties could be purchased by a retail property trust and let to independent operators on a non-profit basis. That’s not to say the rents would be at giveaway levels – the idea would be to generate funds for other local projects as well as to expand the property portfolio – but rents would be kept sustainable with respect to other costs and the profitability of tenant’s businesses.

There would be some element of profit sharing involved along with principles of tenant mix, competition, and the curation of the overall trading environment. But small businesses and a variety of uses could be encouraged to keep an area varied and vibrant.

Rents would be pegged to factors other than the usual relentless pursuit of asset valuation. That way we could ensure some longevity for both the local trading environment and the businesses within it. Moreover pioneering entrepreneurs who move into the poorer trading zones, and then revitalise them through their own creativity, innovation and bloody hard work would get to reap the benefits when the locale becomes trendy and profitable. Rather than landlords immediately following the money and moving in yet more coffee bars, mobile phone shops and anyone else who dangles a big wad of cash in their general direction.

Ultimately the goal would be to press the reset button on the commercial property market, providing some alternative dimension to the rental tone and thus undermining the closed shop rent review stitch ups that usually lead to ratcheting rents and more literally closed shops.

Rising-RentI’m proposing a return to the days when landlords and property owners worked in conjunction with tenants to foster a long term relationship. Both were happy to receive realistic returns on their investments and were able to plan for the future, rather than constantly watching over their shoulder waiting for the next rent review or feverishly calculating the chances of your own survival when the shop next door is let at a blue sky rent that you know you’ll never be able to afford.

You can call me naive – indeed somebody did on Twitter shortly after I revealed this idea in my Retail Week column last week – but I really believe that if we’re to encourage future generations of high street pioneers, we need a cultural shift away from the idea that commercial property is the investment gift that keeps on giving.

In my view, the day landlords swapped the value of a solid reliable tenancy for beliefs in such fairytale concepts as upwards only rent reviews and ever increasing portfolio values was the day our high streets started to die.

So there you have it. A brief taster of my idea of a high street utopia. Somewhat different from that proposed by the future High Streets Forum and the BPF, but something that would be about long term, sustainable revitalization, not just a valuation on a balance sheet.

I believe that if the high street is to have a future, in whatever form, we need to be thinking these seemingly impossible thoughts. And if the government and their various advisers are serious about revitalisation they should be encouraging concepts that do more than prop up the property status quo. If anyone else wants to get step outside that box with me, please get in touch.

This blog was originally published as a guest article on the Future High Street Summit blog

Retail Technology – Master or Servant?

Facetime-Video-Phone-1950sAs I approach 20 years as a high street retailer I think I may have reached that age when I look back through the Vaseline smeared lens of nostalgia to simpler times when summers were longer, life was sweeter, shops were called shops, rather than stores, and the only channels we talked about were the 4 we had on our 20 inch TVs.

In those barely remembered days, window shopping meant standing with your nose pressed to a plate glass shopfront rather than your Microsoft phone, Android was a morose character in the BBC version of The Hitchhiker’s Guide to the Galaxy and a web browser was someone who took rather than more than a healthy interest in arachnid architecture.

I’m not sure if it’s the change in the weather, the recent march of the souls of the undead on Halloween or simply the calm before the chaos of Christmas kicks in, but the last week or so has seen a marked increase in the proposal of ideas that will supposedly elevate the retail industry from these humble roots to previously undreamed of pantheons of technological supremacy.  Personally I’m not convinced.

Dynamic Pricing

Firstly we had Kingfisher’s Ian Cheshire and his predictions about dynamic pricing systems.  LCD shelf edge labels connected to a central computer will, he believes,  revolutionise the high street, allowing prices to be changed by the hour in response to demand, the presence of a particular customer demographic or even the proximity of a particular customer.

This was coincidentally backed up by a piece from Roy Horgan in the same edition of Retail Week Magazine, holding forth on pretty much the same hokum. I guess we can’t blame Roy, considering he works for a company that would likely be at the forefront of a roll-out of such technology, but as a retailer I’d have thought Ian Cheshire would have had more sense.

Comparing the day to day retail proposition with the pricing flexibility of an airline ticket or a hotel room is to miss the fundamental point by a nautical mile.  With the exception of some food uses, consumers are just as able to be flexible with their custom, so changing prices at particular times will only shift buying patterns.

To me this just sounds like the holy grail that RFID was held up to be some years ago.  Back then we were told that we’d have radio tags in everything from T-shirts to teabags but in didn’t happen.  Why?  Because ultimately the investment in the technology required didn’t justify the expense.  Sure, it would be great to be able to scan an entire shopping cart in one go, but if you need to ensure everything down to your last tin of beans has a tag on it that probably costs more than the contents, it’s never going to fly.

Click and Print Bling

Next we had the idea from Argos digital director Bertrand Bodson, that within 15 years we’d not have to worry about having our online purchases being shipped to us.  No more waiting for the delivery man or picking up that irritating ‘while you were out’ card.  No, according to Bodson we’ll all be furnishing ourselves with 3D printers where everything will appear like magic from within.

This was either a very transparent attempt at grabbing a few column inches during a slow news week, or Bertrand had been watching far too much Star Trek in his spare time.  He certainly didn’t seem to understand how 3D printing worked or what it’s limitations were.  The idea that anything other than the most simple products could be delivered in this way is plainly ludicrous.

handmade-jewelleryFor example, one of the products Argos will apparently be sending to us via this new channel will be jewellery.  As a jeweller myself I found this a heroically ill-conceived statement.  Presumably the idea is that we’ll all be sitting with a stack of gold or silver in our 3D printers, along with an equally dazzling collection of precious or semi-precious stones. Then, once we’ve ‘printed’ out all the components for the necklace of our dreams we’d only have to gain the knowledge of an experienced jeweller to polish them, finish them and then put the whole thing together.  That should take 2 or 3  years study on a good jewellery making course, plus the access to a small workshop, but that’s got to be better than waiting from the completed article to come through the letterbox right?

Why Fi?

Broadly this idea that technology will be the answer to all our problems seems to be taking hold across the industry.  A major plank of the recently published review by Bill Grimsey and his team suggested that one of the key innovations that will save the high street from ultimate demise is a wireless network that will apparently have customers prowling the streets with their noses pressed to mobile devices informing them of offers in the stores in the locality.  Presumably this will be a far better option than just raising their heads and looking in the shop windows.  I don’t dispute that Wi-Fi provision will play an important role in any future community area, but the idea of bombarding shoppers with local offers and adverts via a mobile device has been tried before without much success.  Perhaps it’s an idea who’s time will come, but the practical aspects of armies of people tapping palm pads rather than simply wandering about the shops seems to me at odds with what I understand as normal human behaviour.

Google Glass

google-glass-the-jerkProponents of Google glass have similar aspirations, with digital commerce solutions provider Venda recently publishing a report entitled “Wearable Technology: The High Street’s Secret Weapon?”.  Again the idea seems to be that wearing a clunky bit of face furniture with it’s origins in the 1970s children’s TV show Joe 90, will give you far more insight into available offers and promotions than simply looking at a sign next to the product.

I can appreciate blue sky thinking as much as the next person.  I know many of these seemingly unworkable ideas need to be thrown into the ring to allow them to be torn into digestible pieces that at some point may help to construct the next must-have innovation.

I’m by no means a technophobe either.  I’ve been working with computers since 1973 when the processing power we now take for granted in a microwave oven would have needed two huge rooms to house it, along with team of technicians on 24 hour call to periodically hit things with hammers.

I’m an early adopter of most new tech.  My company has had a website since 1995, and I designed and programmed from scratch the EPOS system than has run our inventory control and customer interfaces for the past 20 years, after finding a dearth of such software in 1994.

The good old days?

greengrocers1945So this isn’t a lament for the ‘good old days’ when ruddy faced greengrocers weighed out veg by eye and knew every customer for a 5 mile radius (although that was a golden era I can almost remember).  No, I fully understand that as modern retailers we all need to get our heads round at least some of this newspeak.  But my fear is that as ever more of these technologies are heralded as the answer to engaging an increasingly jaded consumerate, are we not also in danger of confusing the humble shopper as much as ourselves with an overload of ineradicable data and jargon?

It seems like every day there’s another start-up company or new think-tank that re-invents the retail wheel with yet another concept or strategy.  From the plethora of competing payment methods to new ways of presenting products in store.  When in essence the people we’re all selling to haven’t really changed from those we served before all these clever bells and whistles started dazzling us with their white hot potential.  More often than not I think we’re witnessing the birth of technologies for their own sake.  Answers looking for a questions and solutions looking for a problem.

Blind Alley

In practical terms it’s likely the very people that will be embracing these technologies, the young, may be the very demographic that in the future will have much less disposable income with which to buy all the stuff we throw at them.  If that’s true, I’d say we’re in danger of disappearing up a very dark and potentially rather empty alley in the not too distant future.  At the end of it we may see nothing more than our own hubris blinking back at us.

So let’s not forget the basic tenets of retailing as we launch headlong into this technological Valhalla.  The old aphorisms of customer service and personal interaction are often trotted out at this point in these discussions, and I’m afraid I’m not going to be any more original than that.  But in the final analysis I still maintain that we should only use technology if it enhances those two most basic functions of the humble shopkeep rather than seeking to find replacements for them.

Air_Conditioned_Shoes_Crazy_Inventions-s650x595-337964-580New technologies do of course offer fantastic opportunities, but ultimately we still need to be good retailers with all the same skills and motivations that were needed by that greengrocer back in the 1960s.  New ideas are of course exciting and innovation is always needed to keep our industry moving forward.  But I think we need to be certain that we’re responding to customer aspirations rather than confusing them with unwanted information, interaction or propositions.

Technology has brought us as much pointless gimmickry as it has opportunity, and as someone much cleverer than me once said, just because we can do something doesn’t mean that we should.   We should driving innovation, rather than being driven by it.

When is a U-Turn not a U-Turn? The Parallel Universe of the BRC

300541Last week’s sudden abandonment by the BRC of calls for a rates freeze came as something of a surprise to most of us, especially those of us who saw a freeze as a compromise anyway.

With business rates increases over the past two years adding over half a billion quid to retailers overheads bills, it didn’t seem too much to ask for government to allow us a bit of breathing space.  Even more so in the face of flatlining high street sales and the erosion of margins by other taxes such as VAT, which have already caused multiple failures this year.

A freeze was never going to be the final solution though.  The growing clamour for a complete revision of local taxation must by now be reaching even the lofty heights of the ivory towers inhabited by the Chancellor and his advisers.  Even so, it seems nothing is to be done to offer a helping hand to retailers.  The closest we’ve come to any direct action on high streets in the last 2 years was planning minister Nick Boles recent proposal that they should effectively be sold off to residential developers and forgotten about.

Now the BRC, an organisation I’d have expected much better of, has not so much blown the idea of a rates freeze out of the water, it’s sent it into orbit!

The reasons for this about-turn, according to Director General Helen Dickinson, is government claims of a potential £1Bn hole in the country’s finances.  This, she says, has led her to see the error of her ways and ally the BRC with the CBI who have been calling for a 2% cap on rates increases, rather than a freeze, for some time now, arguing that this is a more achievable goal in the short term.

Indeed Dickinson came out fighting very soon after the announcement of the BRC’s change of heart, with talk of a ‘step up’ in their campaign over rates reform with a pronouncement that this will be a long term goal.  The obvious disconnect between those two statements didn’t seem to occur to her at the time, or as far as I know, since.

Realistic ideals

Yes it can be argued that in any negotiation there’s little point in holding out for an outcome or a deal that you’re unlikely to be able to achieve.  Asking for the impossible does make you look unreasonable and in some cases faintly ridiculous.  But a freeze was not an unrealistic ideal.  Certainly not if it was applied to retailers only.

The figure of £1Bn loss to the treasury was, it appears, a little over-egged anyway.  The true loss is predicted to be around £840M and that’s only if the freeze was applied across the board to all businesses.  Taking into account rates relief, that figure could be as low as £700M.  But I suppose a figure like £1Billion represents a powerful headline grabbing number, supporting a Treasury polemic that the BRC appears unwilling to challenge.  After all what’s a few hundred million here or there?  Not much it appears, unless you happen to be trying to get the government to reduce the rates burden by a similar amount.

Special Case

In any event, I’d argue that retail is a special case, carrying as it does multiple burdens both in duplication of the charge over multiple locations, and with deference to the amount it contributes in other ways to GDP, not least in terms of employment.  In those circumstances, if the government really wanted to help,  retail could be singled out, thus significantly reducing the overall impact of a freeze.

In fact based on last years increase of £175M, if the reduction was applied to retailers only, it would take something like 5 years before we got close to £1Bn, unless inflation moves drastically northwards.  That’s plenty of time to bring in a new and fairer form of local taxation.

Although I suppose with predictions of next year’s increase running at anything up to £300M it might not take quite so long.  Even a cap at 2% would leave us facing an uplift of around £200M showing just how little would be gained, even if that could be achieved.  Either way the point is an overhaul of the rates system should already be a government priority.  A freeze for a year might sharpen the minds and pencils of those who talk about reform without ever actually doing anything about it, and with potential rates revenue likely to continue declining as many more stores close for good, the need is becoming more urgent every day.

percentageHelen Dickinson herself has acknowledged that :

[a freeze] “wouldn’t be enough to address the significant impact that business rates are having on local jobs, town centres and communities”

Yet somehow she seems to be arguing that a 2% increase would be a better option.  Perhaps that makes sense in some quirky, mathematically challenged, parallel universe, but until the Large Hadron Collider breaks through to a dimension where a 2% increase is better than no increase at all, we may have to file that comment under ‘S’ for Slightly Silly.

Simple ideas like adding ring-fenced increases to VAT or corporation tax might even net a greater income for the exchequer.  But perhaps there’s a hint at what lies behind the BRC’s change of heart.  Would it be outrageously cynical of me to wonder if all those large scale retailers that have the ear of the organisation have just realised that a turnover or profit based taxation system might actually cost them more?  Especially if effective action was taken to reduce tax avoidance schemes at the same time.  Just a thought.

Incredibility

From the comments I’ve received on this move so far it’s done serious damage to the credibility of the BRC, certainly with small businesses.  There’s always been a belief that as a trade body the BRC were rather more concerned with the fortunes of larger retailers, especially supermarkets, than with those of smaller independents.  This wasn’t a view I supported, but this capitulation on one of the most pressing issues on the high street will do nothing to dispel that belief.  The alignment with an institute like the CBI also pretty much puts the lid on any claims that could be made for the BRC being in touch with the grass roots retailers.  That’s all very disappointing, to put it mildly.

Happily though the Federation for Small Businesses does seem to have remained on the side of the little guys and coincidently launched their own campaign for a rates freeze on almost the same day that the BRC backed away from theirs.  I’d urge everyone to sign their petition and get involved with the campaign.

Not a negotiation

And there’s the difference that Helen Dickenson, the BRC and the CBI doesn’t seem to have noticed.  This is a campaign, not a negotiation.  We don’t need to achieve the best result we can by simply asking for what we think we’ll get.  We should be stating a position that is defensible and then fighting for it.  Yes, ridiculous expectations are a waste of energy and resources but we’re not expecting cash handouts to private businesses, jet packs or for Vince Cable to actually bother to research the difficulties that high street retailers face before he makes yet another dismissive speech.

protest-is-beautiful-free-2007This is a about taking a lobbying stance based on principles and fairness in the same way that campaigners have fought down the years to reform other unfair social inequalities.  Small retailers and their staff depend on the high street for a living.  In many ways reforming the inequities of an unfair taxation system is every bit as important as the fight against sex and race equality, or other socially corrosive political stances.  You can’t negotiate those values and aspirations away just try to save face and score an easy win.  Certainly not if you want to remain relevant to the people you claim to represent.

High street decline – Re-task or re-think?

6741713-a-decaying-and-rusty-street-sign-for-a-high-street-representing-commercail-and-retail-in-decline

There’s been much talk  from various quarters about needing to come terms with the idea that the high street is dying.  Bill Grimesy has set this as the starting point in many discussions, and more recently the head of Ocado, Tim Steiner, expounded pretty similar views in a rather unhelpful gush of vitriol to the national press.

The rhetoric characteristically continues along the lines that we’d all better get used to it and deal with the reality.  ‘Dealing with it’ usually involves tacit agreement that shopping malls will be the main destination for consumers of the future and the rest of the slack will be taken up by the direct internet purchases, click and collect and m-commerce.

Ailing high streets, we’re told, will need to re-imagine themselves into areas that will attract people for a variety of reasons rather than just shopping.  Empty retail properties will be re-tasked into other uses, primarily residential.  There’s usually a raft of other ideas that come along in this mix.  Crèches, art galleries, community centres and various other esoteric uses are floated as essential ingredients in a new-age municipal Mecca that will sweep away the tumbleweeds and revitalise areas that people that are staying away from in droves right now.

It’s a view predicated on pragmatism that has some merit.  But I’d ask at what point does pragmatism slip into the realms of defeatism?  I think we’re a long way off from throwing in the towel on the high street, we just need the political will to deal with the underlying problems that have dogged it since investment landlords, property developers and city councillors first crawled out of the primordial slime.

Logical

I don’t argue with the logic of mixed uses in any retail environment, based as it is to a large extent on models already in existence in the shopping centres and mega-malls that are now a ubiquitous part of the UK consumer landscape.  It’s a truism that shoppers don’t just want to shop these days.  They want to drink coffee, browse the internet, have a free makeover or a life-changing experience on a climbing wall.  But with all this already available in the big  retail and recreational cathedrals, one has to wonder why exactly people would return to high streets, even after the proposed transformations are complete.  If all it’s going to take to bring these people back into their local areas is a few new service providers and a community centre, why hasn’t this already been done years ago?

parking_1879549cThe answer lies in the roots of all the problems currently besetting local high streets.  That of high rents, high rates, poor provision of expensive parking facilities, and the lack of a co-ordinated approach to tenant mix and shared space management.  Yes the same boring old issues I’ve been going on about for years, but they haven’t got any less injurious to retailers fortunes with age.

These shortcomings have already been trumpeted by various commentators and pundits, not to mention being detailed chapter and verse in the Portas Review.  It’s likely that Bill Grimesy will cover some or all of this same ground again when his own report is published in a few weeks.

None of this is news, certainly not to those retailers struggling in such areas, or to the landlords faced with empty properties as a result of previous failures.  The answer is to deal with these issues, not just talk about them.  The answer is not to give up on the high street model and dismantle it by stealth.

Small high streets are incubators for fresh retail ideas driven by entrepreneurs with a good idea and not much capital.  The fall in real terms value of commercial property should be a positive benefit in those circumstances, but by and large this is being undermined by landlords and developers who are desperately holding on, waiting for the boom times to return.

Add to this a government equally addicted to milking the high street cash cow through an iniquitous business rates system, and you don’t need to be an economic whizz kid to see why high street property has become toxic.

Re-model Re-task

By making a case for re-tasking or re-modelling empty shops we simply lay the groundwork for landlords and developers who would love to be able to turn empty shops into ‘luxury flats’ or demolish problem locations altogether and start again.  And who could blame them?

imagesBut in doing so we risk losing a valuable resource that we’ll probably never get back.  Stores that right now that could, and should, be let on viable rents to small retailers eager to get a foot on the commercial property ladder.  And I mean on proper long or medium term leases, not the fudgy panacea of the pop-up.

Once these units are gone those opportunities will disappear too.  The large malls aren’t interested in small retailers in the long term, no matter how much they might say they are, and once there’s no other alternative where will independents have left to go?

Yes some small retail units will likely be left in town centres, or included in redevelopments.  But then the reduction in availability will simply serve to support the high aspirations of landlords that have led us down the road we’re currently coming to the end of.  The fact that there are large numbers of empty units being left languishing by landlords and letting agents asking for frankly stupid rents should be seen as a potential resource, not a problem to be erased by sending in yet more deep pocketed developers.

Opportunity knocks

There is an opportunity right now to rescue the situation by forcing landlords back into the real world.  I’ve long advocated imposed rent control and local retail zoning, similar to the systems put in place to deal with down at heel areas in the USA in the 60s, 70s and 80s.  If a property is empty for a certain period of time, local authorities would be able to take over the administration and let the unit on a fair rent.  Landlords would be offered a return on investment at a set level above the current base rate and would of course lose liability for empty business rates.

This would go hand in hand with new planning powers to ensure a sensible tenant mix within given zones, thereby reducing the ‘usual suspect’ nature of small high streets, often populated with the same facades of betting shops, charity shops, coffee bars, mobile phone operators and the like.

atla-rent2-0120I’m all for the free market economy but high street decline is a socio-economic issue that needs to be managed at a local and national government level.  It has knock on effects to the well-being and safety of local citizens and the monetary and social costs associated with those factors.

I’m not averse to seeing retail units turned into other service type uses, but I am very much concerned that once permanent changes are made to retail properties, especially into residential, we’ll see a decline in the small independent sector that will simply strengthen the dominance of  large malls and developments that are far less supportive of those types of operations.

Re-tasking retail into other uses is certainly going to be an interest grabber for politicians and developers keen to make a killing out of empty units in town centres.  But if they also kill off the high street in the process I think they rest of us will all be the poorer for it. As Joni Mitchell once sang, “you don’t know what you’ve got ‘til it’s gone”