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Convenience stores buck shop closure trends, reveals new research

17 February
11:34 2012

Multiple convenience stores, supermarkets, charity shops, pound shops, bakers and credit unions are bucking the trend for store closures in the UK, according to data published by PriceWaterhouseCoopers (PwC) from research by the Local Data Company (LDC).

By comparison, bookshops, electricals, home furnishing, menswear, off-licences, bars/pubs and travel shops are all falling in numbers.

From a net increase in 2009 of 1.2%, multiple retailers have for the first time shown a net decrease of -0.25%, a net reduction of 174 shops in 2011. Great Britain’s multiple retailers closed 14 stores a day on average across Great Britain in 2011, according to the data

Mike Jervis, PwC’s insolvency partner and retail specialist, said: “A common feature of retailers in distress who we are dealing with is that they have too many locations. Relatively long leases have been entered into in a growth phase of the economy which are no longer appropriate.

“Where over expansion has already taken place, retailers need to face that reality and formulate a strategic plan in partnership with landlords, not in confrontation with them.

“Retail is increasingly becoming a partnership between the store group, its suppliers and the owners of its locations. Like any partnership which falls on hard times, dialogue involving all partners is key.

“The rise in convenience stores is due to them being a growth platform for supermarkets, needing to meet consumer demand for local shopping outlets where it’s easy to do regular big shops as well as ‘top up’ and have easy access to fresh produce.

“Electricals and bookshops have suffered as these products are now increasingly bought online but retailers in this sector are typically carrying unnecessarily large property portfolios.”

Christine Cross, chief retail advisor to PwC, said: “Inevitably, the reduction in consumer confidence and growth in online spend has placed pressure on retail return on space.

“Like-for-like retail sales are no longer a sound measure – the real measures are earnings per share or profit for non-listed groups. Those companies who try and drive like-for-like will push new store openings to the point of exacerbating too much retail space, inflating stockholding and reducing returns.

“The new model must be to properly evaluate the role of the store to the customer in all its guises from innovation and inspiration to transact or just collect. There is no point in paying for space that is not earning its keep.”

Matthew Hopkinson, director of LDC, said: “Significant changes have happened in the way multiple retailers operate and locate. With a significant number of leases expiring the opportunity to drawdown to a smaller number of stores that more suit the needs of omni-channel retailing is happening.

“In the past the closures were offset by openings but 2011 has shown a true decline in multiple retail and leisure outlets across Great Britain. With the move to out of town locations and the numbers of closures being announced currently, this decline is likely to continue into 2012 and thus lead to a rise in vacancy rates.”

Source: PwC/LDC

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