How do we reverse the growing trends of empty shop units in your town?

Adrian James

We have all seen it – the horizontal ‘A’ board loudly proclaiming a unit in a mall or street is up for rent, together with the whited out windows, blotted to keep opportunist thieves from breaking in. An eyesore. At one point in time the shop would have been busy with browsers mulling over purchases and store colleagues waiting patiently until they made that dart for the till. It’s been the story of ‘shopping’ for my generation since I can remember and even with the growth in e-Commerce, the word shopping still conjures up an image of someone in a store browsing. 
 
The fact is we don’t need the same level of store space we had in my generation and as the smartphone takes hold, the horizontal ‘A’ board will become a blight in every shopping area in the world. While many will not shed a tear for wealthy landowners and funds who own the units, we should worry about the effect it will have to employment. Since the decline of manufacturing in western economies, industries like retailing have plugged an employment hole. They have become large scale employers in most towns and cities, generating taxes for local communities. A growth in the number of shop closures is no small problem, it represents a major headache for government, one that many have not even foreseen in their hurriedness to advocate a digital future. 

Increasing staff costs and lease liability

Some governments have reacted in a small way by trying to reduce the administrative budget on retailers, fearful to go too far until the extent of the issue bites public opinion. In the UK, the CEO of Sage, Stephen Kelly, recently wrote in the Telegraph that the Chancellor needs to do more to help small business and retailers in his next budget. This would see a change to business rates allowing the retailer to have a lower cost of business, thus compete with e-Commerce. Of course this would help level the playing field but underneath that article was something that presented a bigger issue for retail – the appropriation of property costs on the balance sheet (lease liability). 
 
On January 1st, the International Accounting Standards Board (IASB) made the changes to allow investors and analysts to understand the true financial health of a company by requiring businesses to put their lease obligations onto the balance sheet. It is highly unlikely that those same investors and recommending analysts will be as willing to invest in companies with large liabilities unless they are brought under control and proportional to the business. To compound matters for the retailer, we have seen the introduction of the ‘living wage’ by many governments to increase staffing costs. It is inconceivable that we will not see more store closures and redundancies.

Keeping our heads in the game 

So will this heady cocktail of rates, leases and wages see us lose a sector that has been part of our lives for hundreds of years? No, but it will have to get smart fast. Retailers getting smart means working with governments to confront the issues while working more efficiently and with better data to maximise your existing operations. The humble shopkeeper cannot be a humble anymore. We need to be designing stores to convert, with staff equipped to ensure no customer feels the need to go online for better value. We need to promote products that adds to the basket value at the right time. We need to go to suppliers and get them to pay for their product advertising in store. We need to give consumers coupons that are delivered to their handset rather than to their door. We need to redefine retailing with models that put data at the heart of what we do. 

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