And so we see a rush of retailers closing down. Some are bust, some may go bust, others are victims of rumours, others merely cutting back. But what about the survivors, how are they set to perform?
I will come clean. I am not a fan of many of the stores that are bust or in big trouble.
Jane Norman, or so I am told, pitches its wares at young women between the ages of 15 to 25. But even within this sector it has a niche. Its clothes only fit girls who are size 14 or under. So that’s a very narrow audience. Then there’s a further problem; others do target that same audience, but seem to do so a good deal better.
Then there’s Habitat. I was quite surprised to learn this store has had any turnover at all over the last ten years. Had it really moved on from its 1980s heyday? To an extent, Habitat reminds me of a 1950s science fiction film predicting what the world would be like in the early 21st century. You know, clunky computers, flying cars that look like old fashioned Cadillacs, only with wings.
The list of tottering stores goes on.
Rumours are circulating on Clintons. Oh well, I suppose people had to stop buying advent calendars for dogs eventually. (I don’t even think Clintons was that good at selling cards.)
I am slightly more sorry to see problems at Thorntons; my local store sells a wonderful hot chocolate. But let’s face it, a chocolate store was always going to struggle during times of hardship.
I feel sorry for HMV. It’s a popular store in terms of foot traffic, but the competition it faces from the Internet and the likes of Tesco is huge. Sellers of DVDs and CDs would be worse off if there was no HMV, but equally can you stop the tide?
My own personal favourite store is Waterstones. I know it is only a matter of time before rumours start circulating about its survival. Rocketing sales of Kindles and competition from Amazon and the hypermarkets are making life very hard for the store. You would have thought that book publishers would be worried. Apparently not, or at least that’s what one book publisher tells me. She reckons the book world would be better off without the store; that, if it went, other book stores would fill the gap in the market it left, and they would be run a lot better. Apparently, Waterstones’ buying policy makes it quite unpopular with book publishers.
Personally I think books are important, and for me this store is like the shop window to an entire industry. I believe if it went under, society as a whole would be poorer.
It is, of course, no surprise to learn about the high street’s problems. The latest data from the ONS was pretty predictable, but telling nonetheless. Real disposable income fell 0.8 per cent in Q1 relative to the previous quarter, one of the biggest drops since the end of World War II. Frankly the data on average wages – which has been consistently showing wages lagging behind inflation for months now – made it clear that disposable income was on the fall.
It has been a funny old downturn. During the recession, households were better off (that’s on average, after taking account of debt payments, and according to the ONS). I am not even so sure that the high street closures in 2008 were quite so bad either. How Woolworths, which was good at selling Easter eggs and pick and mix but that was about it, survived as long as it did is a mystery to me.
But now the recession is over, retailers are struggling more than ever, and households are beginning to suffer. And we see the growing popularity of charity shops, pound stores, and the likes of Matalan and Primark.
But, surely, the more stores go out of business, the more there is left for the survivors. The economic cycles work the way they do partially because of a kind of overreaction. My guess is that when the high street fallout has finished, we will have seen more bankruptcies than was necessary to counter the falling level of customer purchasing, and that there will not be enough stores out there to meet demand. Every three months when the quarterly rent is due, we will see more retailers go under. But those that can survive, those with the cash reserves to see them through, could yet pick up rich pickings when the downturn finally ends.
PS. There has been a lot of talk lately about a potential rise in repossessions if interest rates go up. Mervyn King has entered the furore, arguing that fears are overplayed because interest rates are not going to go shooting up. He is right, of course. Even if the bank ups rates soon, I see them staying below 2 per cent for a very long time yet. My fear relates to the longer term. Rates will rise eventually. Central banks may even be powerless to stop rates determined by the money markets from rising, especially if China stops buying dollars and retiring baby boomers start eating into their savings. And unless we see sharp rises in real wages before this change in the demand and supply of money, I fear for what will happen next.
These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees