What should we learn from the administration of Debenhams?

The news of Debenhams falling to administrators last week was, of course, disappointing to the whole industry, and we are hoping to see a resolution, namely for the staff and jobs that will be affected. However, over the past few years, we have seen a massive structural shift in retail, and while situations such as this are disappointing, we cannot be surprised.

The high street is changing, with customers wanting a very different experience to before, and adaptations need to be made. Retailers need to adapt their business models, while council’s need to adapt their policies to support and prioritise the high street. This however, is not the only issue facing stores such as Debenhams.

The underlying problem we are seeing is rates. 6% of GDP comes from retail sales, yet retailers are paying 25% of the business rates for the whole country, and for some, rates count for over 55% of their tax bill. This antiquated tax system is not sustainable or suited to 21st century business. The government needs to start looking at a long-term strategy and review of business taxation if we are going to keep retail thriving.

There will no doubt be more stores closing down in many towns and cities, however there is certainly a rationalisation in retail across the UK. What we have seen in the West End and other big city retail destination, such as Manchester and Birmingham, is that big brands are keeping flagship stores open, not only as shopping destinations, but as brand statements – the best Topshop, the best John Lewis, the best Apple stores. Although this shift to ‘big stores in big destinations’ will mean that a lot of other high streets and towns are going to see less retail, it will also push retailers to reconsider what they use their bricks and mortar stores for, and we need to make sure that planning and licensing regulations are supporting retailers as they adjust their business models in this way.

LBC invited me to give my reaction to Debenhams’ news and discuss the changing landscape of retail. Take a listen here:

 

Mon 15 April 2019