Unfortunately, not everybody manages to secure a rescue deal with their creditors which is very sad to see, especially to those who lose their jobs. We’ve picked out some household names whose demise has been in the last ten years and looked at what the future may hold this year for retail businesses.
With a history of 88 years on the high street and still in the news today with the pension deficit of £571 million.
Sold by Philip Green in 2015 for £1 in 2015 to Retail Acquisitions led by Dominic Chappell, writing off £215m of debts in the process. However the following year it began an insolvency procedure to reduce and transfer pension liabilities in the Pension Protection Fund.
Closing 163 stores including a flagship store on Oxford Street, it seems a lack of identity and lost in the middle market resulted in customers going elsewhere.
Everyone remembers popping in here one time or another. With over 9,000 stores across the world, it went bust in 2013, with privately-owned franchises trying to struggle on. Can you believe one is still open today in Bend, Oregon (USA)!
A lack of changing with the times and reinvestment was the main demise for the company with online subscription services on the horizon like Netflix.
The bookshop arrived in Britain in 1998, promising a revolution offering out-of-town stores where customers could browse for hours and sip cappuccinos on leather sofas. It felt something like a set from the hit show Friends. Fast forward over a decade later and it was closing 45 stores in the UK. Two years later, its US business followed suit filing for bankruptcy.
The company blamed declining sales and a rapidly changing book market, struggling in the face of fierce competition from supermarkets, online sales and digital books. One retail analyst commented, “Although we now have a coffee culture, the idea of driving four or five miles to browse, then sit in a Starbucks and read a book never sat well with the UK consumer.”
Toys R Us
After 70 years, the US toy store giant shut down all of its US and UK stores in April 2018, after filing for bankruptcy protection in September 2017. Its Asian stores are still open, having been sold to Fung Retailing and several other lenders in November 2018.
Many were quick to blame the rise of online shopping and the likes of Amazon. However the retailer was saddled with an enormous debt burden after being taken private in 2005, and it never really recovered.
This prevented the company from investing in necessary changes to compete like an improved in-store experience and its online business.
Retail expert Kate Hardcastle said, “Toys R Us had huge unnecessary warehouses and they could have repurposed that for experiences, but they just missed the mark completely.”
Founded back in 1974, with 335 stores, it began to struggle with tough competition from rivals Poundland and Poundstretcher as well the supermarkets.
Hit by the fall in the value of the pound after the Brexit referendum in 2016, imported goods rose in price and it closed in August 2018.
Often located close to competitors, it became difficult to distinguish between them and in a very crowded market pace, volume in each basket was needed to make a profit.
What will the future hold for retail?
Looking at what some key figures across the industry have been saying, it makes an interesting read on the upcoming year.
David Ebbrell, Chief Executive of M7 Real Estate and a client of Vantage said “Retail, an area of opportunity but with a health warning, is not dead. However, for retail to survive it either must be either an experience or highly convenient for customers.”
Andrew Jones, Chief Executive of LondonMetric Property “We expect online non-food sales to increase to at least 30% (of total non-food retail sales) so it is fair to assume the UK is oversupplied with retail space by around 30%. Therefore rents in the retail space will need to fall by at least 30%. This isn’t a perfect correlation but I don’t think it is too far away. Logistics real estate is a direct beneficiary of this shift online. Historically there has been very little rental growth in warehouse rents and so there is no affordability issues in the same way that physical retail is suffering from.”
From a building surveyor perspective, what can Landlords do to protect themselves?
Don’t leave it too late. We’re here to help if you need any advice.