Retail Carnage Creates a Big Problem and Opportunity

Retailers are failing because of players like Asos and Boohoo. Topshop are the latest to collapse because of them and be bought by them.
The game has got very serious and the pieces on the chess board of the High Street are falling all over the place.

Asos and Boohoo continue to raid the high street for it’s brands. But even though the boards of directors will probably look at their actions as some sort of saviour, the online behemoths are leaving 685 shops empty and over 25,000 jobs at risk.

Their actions create a HUGE problem for the Chancellor and the remaining retailers on the High Streets, that may lead to opportunities for small businesses.

Marc Ford

Marc Ford

Editor-in-Chief, Business Media Owner, Business Coach, Author and Keynote Speaker. Works with over 100's of small businesses every year. Trusted by BBC TV and Radio, Channel 4, Mercedes Benz, Hitachi Capital on business matters.

As was reported last week, the news broke overnight that online fashion retailer Asos has bought the Topshop, Topman, Miss Selfridge and HIIT brands from failed retail group Arcadia in a deal worth £295m.

Fallen from grace Entrepreneur, Sir Philip Green’s Arcadia group went into administration in November 2020, casting doubt over the future of its brands and 13,000 jobs. Asos is acquiring the stock and the brands. However, as per previous examples,  it is not taking on the stores. It is paying £265m for the brands and a further £30m for the stock.

Asos chief executive Nick Beighton said: “The acquisition of these iconic British brands is a hugely exciting moment for Asos and our customers and will help accelerate our multi-brand platform strategy.

“We have been central to driving their recent growth online and, under our ownership, we will develop them further, using our design, marketing, technology and logistics expertise, and working closely with key strategic retail partners in the UK and around the world.”

The Retail World is Getting Very Worried

One of the things that has been said to contribute to the demise of High Street retailers and the boom of online retailers are Business rates. Busines rates are a tax levelled on commercial property occupiers, have created an uneven playing filed between bricks and mortar chains and their online competition, helping drive a slew of high street chains to the wall. Since the start of the pandemic in the UK, Laura Ashley, Cath Kidson, Monsoon, Accessorize, Paperchase and Edinburgh Woolen Mill empires have gone into administration. The collapse of Debenhams which had become an anchor tenant in shopping centres, has and will damage the prospects and goals of businesses around it, leaving some shopping centres half empty.

It Would Be Funny If It Wasn’t So Serious

“It’s a double crime because we are letting online businesses like SAos and Boohoo ‘out-compete’ rivals by not paying as much tax – and when they kill competitors and creditors, which includes HMRC, pick up the tab too,” said former Sainsbury’s chief executive Justin King, who now sits on the board of Marks and Spencers. “It would be funny if it wasn’t so serious.”

But the problems aren’t just the High Streets, the rIpple effect for the Chancellor is a bit frightening too.

Score on the doors: 
Combined Store Closures: 685
Business Retail Bill: £171.8m
Jobs at Risk: 25,000

Under Pressure Rishi

With shops closed in Lockdown, Chancellor Rishi Sunak is under pressure to extend a 12 month moratorium on business rates. Former  BBC Dragon’s Den star Theo Paphitis has said he would be forced to shut 80 of the stationer Ryman’s 200 outlets if rates were bought back in March, which is now only 28 days away.

When a shop becomes vacant, no rates are collected for the first three months but the landlord becomes liable after that – a system that the British Property Federation says is “fundamentally unfair” given shortfalls in rent collection and an increase in refusal during the pandemic.

But ASOS Chairman Brian McBride disagrees. “Arcadia and Debenhams didn’t die because of taxes, they died because they had bust business models and at times were incompetently run. People are shopping differently: giving out tax breaks is not the answer .” He also added that online retailers had driven down prices and widened consumer choice. The last part being a very valid argument, but when you become the only player in the game, that argument will not hold water for much longer.

Opportunity Knocks

It seems inevitable that the Government will have to implement a much fairer playing field, and judging by the speed at which things have happened in the last year, don’t be surprised if their is an announcement of the first stages of levelling the playing field for online businesses in the Budget in March.

But at this time, it will only be a sticking plaster for a system that is broken on a much deeper level. All the big brands have tried their hardest to undermine the systems and tax payable, because they call that, ‘doing business’., so whilst many are crying in their Starbucks this morning, they are as much to blame at the demise of our High Streets as the online retailers. 

But there is hope. As reported last week, these brand purchases have squeezed the middle economy and that means that there are opportunities for businesses to get into that space. Despite the pandemic there is a section of society that is crying out for a modern, exciting and lean retailer that puts customers first. One of the contributing factors to all the retailers collapsing is that they believed their own hype, when in actual fact they had lost the support and passion of their customers. 

There will be deals to be done. There are spaces opening up. (No-ones even asked the Landlords yet.) There are customers waiting. Risky yes. Brave, certainly.

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Business Coach, Author and Consultant. Has worked with BBC TV and Radio and Channel 4 on business matters. Trusted by Mercedes Benz, Hitachi Capital. Keynote speaker.