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Focus on stores: footfall down again in February; LK Bennett's business rates rise estimated

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Visitors to stores fall for the 15th month in a row in February; cost of business rates rises on LK Bennett stores estimated

The number of people visiting UK shops fell by 2% in February compared to the same time last year, according to British Retail Consortium figures for February. A year earlier, footfall was down by 0.5%.

 

Visitor numbers fell most sharply at shopping centres (-3.4%), while they were also down at retail parks (-0.8%) and high streets (-1.9%), according to the BRC-Springboard Footfall and Vacancies Monitor report for February 2019.

 

Diane Wehrle, Springboard marketing and insights director, said the drop in footfall had come even though this February was the hottest on record. “However, the record temperatures only occurred in the final week of the month when footfall rose by +2.5% compared with drops in each of the preceding three weeks, averaging -3.6%,” she said. “Indeed, the balmy conditions certainly helped high streets where footfall rose by +4.5% in the last week of the month compared with an average drop of -4.1% in the preceding three weeks.

 

“Footfall declined in all but one geography and in all but two areas the drop was greater than -2% with a fall of just -1.4% in Greater London. The result for London will in part have been due to Chinese New Year occurring in February this year, but it is actually not an unusual outcome as footfall in Greater London is generally the last to decline and the first to recover due to the diversity of its economy and sheer volume of activity.

 

Helen Dickinson, chief executive of the British Retail Consortium, said: “Consumers have been cautious in their spending, leading to the biggest drop in February footfall for five years. These figures echo the month’s poor Retail Sales figures, which saw weak growth, particularly in bricks-and-mortar stores. While real incomes have been rising over the last year, the uncertainty surrounding Brexit appears to be driving a needs-not-wants approach top shopping.

 

“Things could get a lot worse unless the Government is able to avoid a calamitous no deal Brexit. Such a scenario would likely result in higher costs, higher prices and less choice for consumers – all of which would further harm struggling retailers. The Government must act to protect both consumers and retailers by ensuring there is no chance of a no deal Brexit.”

 

Jat Sahi, consulting industry lead for retail at Fujitsu, said that retailers needed to find new ways to reinvigorate the high street.

 

"The challenge retailers now need to address is how they can attract shoppers back to their physical stores,” said Sahi. “There is a solution: one of the high street’s core advantage is that it can be a social hub for groups to have shared experiences. Consumers are now looking for a unique social experience to consumers, something which cannot be replicated online, and as wider macroeconomic factors take a toll retailers need to inspire them to browse and buy.

 

“To drive this, shops need to turn their operations inside-out. Rather than imposing a generic line of products and a uniform approach to store layouts, retailers need to focus on consumers and lead them with enthusiasm and passion towards a greater vision for themselves through their products and services. And the best people to ensure this happens are those who serve customers every day – the shop floor staff.”

 

Kevin Edwards, group client strategy director at affiliate network Awin.com, said: “This morning’s news makes for grim reading, especially considering this time last year consumers had to battle the ‘Beast From The East’ just to make it to the high street. Concern over the ever-looming Brexit could account for this, but data released by GlobalData suggesting that more than half of Britons shop at Amazon each month is more likely having a damaging effect on the state of the high street.

 

“Whilst online sales also grew at a slower rate than the year before, shopping on the web still presents a more appealing option for consumers and that is the stark truth. Whilst initiatives to save the high street are being discussed in parliament, online shopping will likely continue to increase, and with Amazon taking more of a share away from competitors the high street faces an uphill battle.”

 

New estimates suggest significant effect of business rates rise on LK Bennett

New figures suggest the cost of running LK Bennett stores rose by more than a quarter on its business rates alone. Colliers International has analysed LK Bennett’s business rate bills for 37 shops and have estimated that thee would now be 26% higher than before the business rate revaluation in 2017.

 

The luxury fashion retailer went into administration last week, with 55 jobs lost immediately, and around 500 in danger altogether. At the time, EY administrators said the company had been hit, in already tough trading conditions, by “significant rent increases and business rate rises.”

 

These new Colliers figures give an insight into how significant the rising costs of business rates would have been. The estimate suggests that rates on LK Bennett’s store at St Pancras International Station alone would have risen by 205% to £186,300 – from £61,000 – while rates on its stores at the Westfield Shopping Centre rose by an estimated 101% to £149,500.

 

John Webber of Colliers International, said: ”LK Bennett is yet another casualty in the long list of retail companies either entering CVA or going into administration. The advent of online shopping, drop in consumer confidence and rising costs is taking its toll. Increased business rates are not the only factor in the difficulties for retailers, but for some are that extra cost that takes things over the edge. Retail pays 25% of all business rates, even though the gross value-added from retail is less than 10% (ONS 2018). That’s inequitable. And that’s why it is crucial there is a proper reform of the system."

 

Image: InternetRetaiiing Media/Paul Skeldon

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