Time To Adopt New Business Models or More Retailers will Cease To Trade

The latest UK retail statistics confirm what many of us already know – footfall is down and store vacancy rates are on the rise. Long established UK brands report of ‘challenging retail conditions’ with reasons ranging from impossible business rates, uncertainty surrounding Brexit to bad weather and cheaper offers online.

The Springboard retail footfall figures for the month of July 2019 revealed:

• The national town centre vacancy rate was 10.3% in July, a slight increase on the previous quarters rate of 10.2% and the highest since January 2015.

• Footfall declined by 1.9% in July, compared to the same point last year when it declined by 0.9%. This is the worst decline for July since 2012.

• High Street footfall declined by 2.7%. Following from the increase of 0.3% in July last year. The three-month average decline is 4.0%.

• Retail Park footfall increased by 1.2%, following from July 2018 when footfall decreased by 0.5%. The three-month average growth is 0.2%.

• Shopping Centre footfall declined by 3.1%, following July 2018’s decline of 3.4%. The three month average decline was 3.0%.

Helen Dickinson OBE, Chief-Executive at the British Retail Consortium commented: “Retailers have faced a challenging environment this month, with declines in footfall on High Streets and Shopping Centres. Sluggish sales growth and declining footfall also contributed to the rise in town centre vacancies, which rose to their highest level since January 2015. High streets and town centres play an important part in our local communities, and we should be concerned by the rise in empty store fronts.

“If the Government wishes to avoid seeing more empty shops in our town centres then they must act to relieve some of the pressure bearing down on the high street. Currently, retail accounts for 5% of the economy, yet pays 10% of all business costs and 25% of all business taxes. The rising vacancy figures show this is simply not sustainable. We need an immediate freeze in rates, as well as fixing the Transitional Relief, which leads to cornershops in Redcar subsidising banks in central London.”

While business rates do indeed need reform, CEO’s from more than 50 high street retailers have recently written to the Chancellor regarding the ‘broken rates system’, there is the fundamental issue of supply chain and readdressing an old system that no longer works. CEO of Fashion Enter Jenny Holloway explains:

“The key word today is ‘nimble’. By offering a design service, by being compliant and by being responsive to changing consumer demands manufacturers have a unique place in fashion today. We can be the very backbone for retailers providing newness in just 3-4 weeks for new styles and for repeats just two weeks. No excess stock, no mass discounting but a nimble and responsive relationship between manufacturer and retailer.”

James Stewart Director of Lean at Burberry adds his comments on why retailers will fail if they do not adopt new business models that are responsive to customers:

“Over the past 25-years I have worked across multiple industries coaching senior leaders a new business model (The Toyota Business System) which has fundamentally changed the paradigms within those industries I have worked.

More recently I have been working in retail and for the past 6-years some pioneering organisations such as Inditex, Lidl & Aldi and now Gucci & LVMH have adopted this business model. I have seen first hand how this paradigm change is now starting to effect the entire retail industry. A polarisation is happening with a few organisations enjoying exceptional growth through this new model and the majority with falling sales and even collapse.

“I can see first hand the importance that the Toyota business model or ‘Lean’ will have if your organisation is to survive in this industry. This happened and continues to happen in the automotive industry. As Burberry’s Director of Lean Transformation I believe there is only one way forward for retailers today. They must understand these new principals of a pull not push business model, flow V’s batch production and true customer centricity.

This is why I’ve coordinated a top level accredited seminar with leading international speakers from some of those retailers who adopted this model. They can share their own experiences with huge success within their organisations who are now leading in their sectors of retail. I believe if retailers do not change now they will die!”