Why Tuesday's retail bloodbath was inevitable

Modelzone, Ark and Internacionale are the latest casualties of a drop in high street spending. Everyone's thinking it, but no one's saying it: high streets are outdated.

by Emma Haslett
Last Updated: 09 Oct 2013

Every June it’s the same: retailers’ quarterly rent bill drops on their doormat, forcing dozens into administration. Last year, it was Clinton Cards. The year before that, it was Habitat and Jane Norman. Yesterday, it was fashion chains Internacionale and Ark, as well as model train shop Modelzone.

All three were shocking – but all were inevitable. None had a particularly strong business model. Internacionale has even been in administration before.

Over the five years since the credit crunch, hundreds of retailers have gone to the wall. Obviously, the financial crisis has sorted the financially robust wheat from the chaff. But the fact that it’s retailers rather than, say, business consultants, entering administration in their droves suggests there’s something about them that makes them vulnerable. Could it be that the high street – a model that’s existed for hundreds of years – just isn’t relevant any more?

Consider this: for several years on the trot the major gripe of retailers, from supermarkets through to fashion chains, has been late summers, which put shoppers off buying bikinis.

On the flipside, budget airlines mean we are more likely than ever before to jet off to the Maldives in the middle of winter or go skiing right up until late April – when the all the shops stock is floaty dresses and flip-flops.

The problem with the traditional retail model is that it is no longer meeting customers’ demands. Stores like Amazon and Asos run from giant warehouses of several million square feet: they have no space constraints on what they can stock. That means we are increasingly used to being able to buy what we need, when we need it. Getting hold of a Christmas tree in mid-summer or a pair of trunks in mid-winter is no longer a problem.

Which means high street shops – with their comparatively small stockrooms and rigidly seasonal lines – are going out of fashion.

Nick Hood, a retail analyst at Company Watch, says the high street is undergoing a total transformation.

‘Of course [in the future] retail will still be a major component of the high street, but it will no longer be dependent on shops,’ he says.

‘The big issue is how many stores are we going to keep? Whether it’s selling to people who want to buy in-store or "showrooming", retailers will still need a high street presence, but how big will it be and how will they make it pay?’

‘Second-tier’ retailers – the Internacionales and Arks of this world – will find the next few years particularly problematic, adds Neil Saunders, a retail analyst at Columino.

‘The big brands tend to be more robust – they’re usually very successful niche specialists with a distinct offer. Those who won’t fare well over the next few years don’t bring anything to the market that’s particularly unique. That’s where the financial model unravels.’

The good news is that for small retailers, competing with the big internet players isn’t as hard as some make out: Hood cites the owner of a Rochdale boutique, who offers same-day delivery to compete with the likes of Asos. Others offer ‘click’n’collect’ – an easy way to buy online and collect in-store.

Ultimately, though, high streets will shrink. Mike Riley, joint chief executive of Local Shopping REIT, one of the UK’s biggest retail landlords, says if anyone’s going to save the high street, it will be town planners.

‘We have to face it: our high streets are too big,’ he says. ‘It needs a brave government to say, "yep, we’ve got a problem", and to use compulsory purchase orders to change town centres and make them a nicer place to visit.

When even landlords like Riley are resigned to the eventual demise – or transformation – of the high street, denial seems futile.

‘There’s no point saying it’s not happening,’ he says. ‘It’s definitely happening.’

- Image: Flickr/tico_24

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