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Comment: Faith in bricks and mortar

Headline figures might highlight rising store closures but the devil is invariably in the detail and there are strong arguments that bricks and mortar is heading… View Article


Comment: Faith in bricks and mortar

Headline figures might highlight rising store closures but the devil is invariably in the detail and there are strong arguments that bricks and mortar is heading in a positive direction as growing numbers of retailers are putting greater emphasis on physical stores.

The latest figures from PwC using research from the Local Data Company (LDC) has found net closures hit 14 per day in 2023, which is a greater number than the 10 recorded in 2022, but it is lower than every year between 2017 and 2021. This recent acceleration is being attributed to one-off large scale restructuring for some bigger retail and hospitality firms that has often involved them right-sizing their store portfolios to balance them with the increased revenues they now generate digitally.

The positive part of the research is that against the disappointing closures for 2023 there were over 9,100 openings across the UK, which is the highest figure since 2019, and suggests there is still great faith in stores by many operators. What’s interesting is how many of the most successful retailers have ongoing commitments to invest in physical space.

One of the most prominent of these is Primark that recently announced a £100 million investment in UK stores during 2024 that includes the addition of new outlets. This sits comfortably alongside its continued wariness of online retail and home delivery. Paul Marchant, CEO of Primark, has recently questioned whether a low-margin, low-price model such as Primark could ever make money selling online when you factor in the cost and resources needed for delivery.

Instead, the company is focusing on leveraging its physical footprint by offering click & collect, which he says drives more customers into stores and boosts average basket sizes. C&C has been initially on trial in certain categories but this is going to be expanded out into overseas markets.

Other successful retailers committing to stores include Sephora that recently re-entered the UK market with a London Westfield flagship outlet and it has announced it is to open further units in the cities of Manchester and Newcastle.

Another expanding retailer is Arc’teryx that has just upsized its Covent Garden store in central London with a 400% increase in its footprint to 8,000 sq ft that makes it the retailer’s largest unit in Europe. This increase in square footage is a positive store-related metric that is not reflected in the net store closure/opening numbers delivered by the research houses. This is a mistake because the upsizing of stores is a major feature of the retail marketplace.

This is certainly the playbook of Zara-owner Inditex that has increased its average store size over the past 10 years from around 500 sq m to 750-800 sq m, according to RBC Capital Markets. This change reflects its ongoing strategy of closing smaller units in favour of larger flagships. And this is helping it improve its sales per sq m, which has moved up from around Euros 5,000 in 2013 to around Euros 8,000 in 2023

While the headlines suggest physical stores are still a stricken part of the retail industry there is much evidence to contradict this and a closer look reveals much to be positive about for the sector across the UK.

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