2017 really has been a time of change for the UK High Streets, from immediate issues affecting businesses on the front line such as changes to business rates, the effect of the minimum wage and footfall variations, to more long term concerns like Brexit and the snap General Election called for this June.
Each, of course, carries its own potential impact on the health of the High Street and the retailers that operate within it.
Let’s start with this hot potato. This is a topic that lobbyists like myself have been banging on about for over five years now.
The calculation of business rates harks back to when e-commerce did not exist, making the cost of property tax for online distributors considerably less than their high- street competition.
The five-yearly national review of rates charged according to property valuation was postponed by Government from 2015 to 2017, leaving a seven year lag from 2008 valuations and the rateable value which should have impacted in 2015 but has not impacted until now.
For areas suffering the most significant economic decline, high vacancy rates, low footfall etc. (predominantly the North of the UK) this has had a negative impact for the last two years.
These properties, where the 2013 valuation was far lower than their 2008 valuation, have continued to pay rates at the 2008 level for an extra two years. It is only now that they will see some reprieve with a rates reduction.
Conversely, businesses in the South have enjoyed two years of rates on the 2008 valuation, with many ignorant of the time-bomb of the 2017 increases. Some London units are now looking at a bill more than double that of last year, meaning they could no longer have a viable business.
Retailers will now need to scrutinise every cost and eliminate all wastage while focusing on maximising product margins, become obsessively focused on both increasing spend from existing customers, while engaging new customers.
Meanwhile, the issue of the April changes to minimum and living wage, coupled with utility increases are greater than the baseline rate of inflation. For retailers with employees, the minimum wage changes could cause some pain, but it also puts more cash in the pockets of consumers, meaning it could be negated by increased sales.
However, this will depend on the varying levels of footfall. While March saw an uplift in footfall, the general trend is more concerning, with close to 30 per cent decline in footfall over the last five years. Opening hours need rethinking, with later openings in the evenings and weekends. The days of opening 9am to 5pm are over and to be a viable business you need to look at your local footfall dynamics and adapt to them.
The General Election
On Tuesday, April 18th, Theresa May announced a snap General Election to be held on June 8th, 2017. She is, of course, seeking a democratically elected position to back her leadership through the Brexit process.
Depending on which stats you choose to review, customer confidence can either rise or fall before a General Election. However, post elections, when results are clear and the uncertainty of who will be in Government is over, consumer confidence generally increases.
Brexit, of course, has already taken its toll on consumer confidence, so, while the next few months will be slightly more uncertain, it is probable that once the election is over, consumer confidence levels will be boosted. However, that leads us to Brexit, which will be a much more drawn out period of uncertainty.
Whether you are an ‘in’ or ‘out’ voter is irrelevant. Brexit has caused immediate and on-going impacts to the UK economy. How the exit is negotiated will be a major concern for big businesses and independent retailers.
We have already seen the drop in the value of the pound, which makes the cost of imported goods far higher than previously. As few toys are manufactured in the UK, this will have an impact on the cost price of goods to most of the UK’s toy retailers.
Retailers will either have to take a reduction in margin to protect the consumer from price rises, or will have to put prices up, risking alienating consumers.
This means that all costs will need to be scrutinised. Can you save money somewhere? Maximise margins and speak to suppliers about any support they can offer, it might not be a cost price reduction but they might offer support for for POS promotional activity, all of which can save the retailer from shelling out and can boost sales.