Blood on the (high) streets

Closing down

More bad news for high street retailers with the demise of the Jessops photography chain yesterday. The Truro store will now be shuttered and in due course, a ‘For Lease’ sign will appear outside. The slow death of the high street continues.

One has to feel sympathy for staff who have lost their jobs in the midst of a recession, victims of the global threat to bricks-and-mortar retailers from Internet based outlets. The current carnage in the high street raises questions about the prospects for small towns all over the UK. This is particularly relevant to somewhere like Cornwall, characterised as it is by small towns (yes, Truro is technically a city, but only because we got a last-minute cathedral at the end of the nineteenth century…)

Cornwall has no shortage of the big grocery retailers, with Tesco, Sainsbury’s and the like constantly sniffing around for potential new store sites. That doubtless explains the decline in town centre butchers and other independent food retailers. What Cornwall doesn’t have is a representative of the one area of bricks-and-mortar retailing that is still thriving in other areas of the UK, namely the mega out of town shopping centre (think Bluewater in Kent or the Trafford Centre in Manchester). For some unfathomable reason, punters still seem happy to empty their wallets to a muzac soundtrack in these soul-sucking concrete, glass and steel bunkers. For better or worse (you can probably guess where I stand on this) we don’t have one of these atrocities in Cornwall. That means that the high street is still highly relevant to Cornish consumers, as the place we go to shop for things we can’t or don’t want to buy online.

So, if we assume that vibrant high streets are an important part of the Cornish landscape, what can be done to stop them turning into a dreary procession of vacant units, interspersed with Starbucks, charity shops and betting shops?

We should ask first why the shops that are doing well on the high street are prospering. Companies like Starbucks are not fools: they are on the high street because they can still make money. A big reason is that there is no competition from online retailers. If you are overtaken by the urge for a big cup of frothy milk masquerading as coffee, you have to go into a coffee shop – ordering one from Amazon is not an option. This also applies to a certain extent to clothes shops as well. So in a nutshell, the high street is still profitable for sellers of goods you can’t buy online (like a cup of coffee or a haircut) or where there is a clear benefit to being able to handle and try the goods before purchase (like clothes).

Where does that leave the retailers that don’t fit into those categories? Well as it happens, Jessops is a good example. They were never going to be able to match companies like Amazon on price, so they had to offer something extra to compensate. In the case of a camera retailer, that could be expert advice or the opportunity to try out a camera or lens – something the customer wouldn’t get from an online purchase. I suspect that one of the reasons for the demise of Jessops was that they didn’t have a wide range of stock and (in my experience at least) the staff weren’t particularly knowledgeable or keen on letting customers handle the goods before purchase. So the customer was losing nothing by just trawling the Web for the cheapest price rather than buying on the high street.

Responding to this kind of challenge is down to the individual companies themselves. If they don’t move quickly there will be more casualties (HMV, Currys, I’m looking at you). But there are some common cost factors, specifically rent and rates, which affect all high street retailers’ viability, and one factor that affects their customers, car parking charges. Most landlords are private companies, so rents are a private sector question, while local government sets rates and car parking charges.

Rents account for the majority of a retailer’s fixed costs. The landlords operate in a free market and have to make a decent return on their assets by charging a fair rent. But as yet more vacant shop units appear in town centres, landlords must surely see that they are in danger of sacrificing their long term prospects by short-sightedly continuing to demand the high rents which helped to push previous tenants out of business in the first place. The more boarded-up shops that appear in a street, the more the value of the other units in the same area is eroded. So why do they do it? On the face of it, it seems crazy for a landlord to prefer to keep a unit empty rather than cut the rent and have a tenant in there. There is a logic to it however. If you’re a landlord who owns multiple properties, dropping the rent on a vacant unit means you run the risk of having existing tenants demand a similar reduction, dragging down returns across your whole rental portfolio. At some point, though, one has to hope that landlords will take a longer-term view; if that means cutting rents to ensure the survival of their customer base and therefore the value of their own assets, that’s what will have to happen.

What about rates and car parking charges? The first is another significant cost to the retailer and the second is a potential barrier to customers coming into town centres to shop. What they both have in common is that they are under the control of the local government rather than the private sector. So in the unlikely event of an outbreak of joined-up thinking in local government, both could be tackled quickly and in a coordinated fashion. If County Hall really believes that Cornwall needs viable, vibrant town centres, why not do something concrete about it rather than sit around hand wringing. How about a cut in business rates for local high street businesses and a trial period in which town-centre car parking charges are abolished? See whether, after 6 or 12 months there has been a positive impact on high street trade and then reassess.

Sure, the middle of a recession is a bad time to suggest policies that would further reduce council revenues. It would, however be a brave experiment which might just work. I’m generally a free-market kind of guy, but there are some areas that require government intervention and this is one of them. It’s quite possible that the short-term revenue sacrifice from cutting rates and car parking charges could be offset by the longer-term social (and financial) benefits of ensuring the survival of the high street. That, of course, would require vision and boldness from our local politicians. I’m not holding my breath….

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