Business | Retail

Bleak winter for Britain’s high-street retailers

DVD rental chain Blockbuster became the latest casualty

  • AFP
  • Published: 14:50 January 20, 2013
  • Gulf News

  • Image Credit: REUTERS
  • Shoppers pass an HMV shop in central London, January 15, 2013.

London: Four big British high-street retailers had to call in administrators this winter as cash-strapped, web-literate consumers proved unforgiving of stores failing to adapt to fast-evolving markets.

DVD rental chain Blockbuster became the latest casualty on Wednesday, with its British arm entering administration — in which a troubled firm brings in independent financial help in a bid to stay operational — a day after music chain HMV made the same move.

Camera chain Jessops went into administration on January 9 and closed its 187 shops shortly after, while electrical firm Comet shut its 235 stores in December. The failures have cost Britain 9,025 jobs, with another 7,780 in the balance.

Bryan Roberts, director of retail insights at analysts Kantar, said this was part of a trend that began with the 2008 financial crisis.

“We’ve been through such a brutally Darwinistic few years, in which all the runts of the litter have been picked off,” he said.

Britain’s still-struggling economy, which climbed out of double-dip recession in the third quarter of 2012, faces at best sluggish growth this year.

Retailers, meanwhile, face stiff competition from supermarkets and online sales, especially in entertainment, where downloads and streaming are eroding markets for physical products.

HMV, Britain’s last nationwide music store chain, failed to produce a strong online offering early enough to combat Amazon and Apple’s iTunes, Roberts said.

“Management in the late 90s was very dismissive of the threat and the opportunity of online,” he said.

Later, the store tried to diversify into areas including consumer technology, live music and accessories, but this “diluted their authority”, Roberts added.

“If you were a consumer who had music tastes beyond the mainstream you were very badly served by HMV.”

Blockbuster was late to grasp the threat posed by online services such as Netflix and Lovefilm, which offer films and television programmes for download, while Jessops fell prey to digital photo processing and phone cameras.

Matt Piner, research director at consultants Conlumino, said store chains needed to focus on multi-channel, “bricks and clicks” retailing along with distinctive product ranges.

He cited department stores John Lewis and electricals firm Dixons — which owns Currys and PC World — among companies proving more resilient. Both offer popular “click-and-collect” services.

Both reported strong Christmas sales, with John Lewis saying takings in the pre-Christmas week had hit £157.8 million ($250.3 million, €187.9 million) — a 26.5 percent increase on the same week a year earlier.

Another group of retailers have been dragged down by debt, even where sales are holding up. JJB Sports, once Britain’s biggest sports retailer, failed in October with administrators only securing a sale of 20 of its over 150 stores.

HMV was also debt-laden, with underlying net debt growing to £176.1 million in the six months to the end of October, and banks and suppliers finally running out of patience on bad loans.

Debt concerns are stalking private equity-owned fashion chain New Look, which said in November it was planning a #1.1 billion refinancing over 18 months.

The government warned in November of unproductive, indebted “zombie” companies kept alive by low interest rates and banks unwilling to recognise their losses.

Researchers Local Data Company said last week that overall store closings in Britain were set to double to 4,000 outlets in 2013 from 2012.

High street shop vacancy rates had already hit a 15-year high in November, with 11.3 percent of shops in town centres empty.

Blockbuster and HMV are still seeking rescue deals, with more than 50 reported expressions of interest in the music retailer, whose chief executive insisted it “still has a place on the high street”.

Roberts, of Kantar, said HMV was likely to survive in some form, as its brand - with a distinctive logo of a dog listening to an old-fashioned gramophone - is “an incredibly resonant brand for British shoppers”.

But he said the future looked “bleak” for Blockbuster, where administrators are to close at least 129 of 529 stores.

Samuel Tombs, UK economist at Capital Economics, said stores would have to wait until 2014 for a more forgiving climate.

“I think consumers are going to remain under pressure this year - inflation is likely to remain above increases in wages for the next year or so, so consumer spending power will be reduced, with pressure to pay down debts rather than spend on the high street,” he said.

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