Apart from the huge job losses and store closures involved, the Boohoo/Debenhams deal announced yesterday, along with what seems likely to be a similar arrangement to follow between Arcadia Group and ASOS (although yet unconfirmed) marks a real ‘watershed moment’ for UK retail.
It finally confirms that the established multiple retail business growth model of hundreds of identical physical stores across the country, involving huge ‘occupancy costs’ such as rent, business rates and service charges, is just no longer viable in an environment where consumers can now choose how, where and when to spend their money (and most importantly can do so without leaving home) The 1970’s, 1980’s and 1990’s retail vision of ‘build it and they will come’ is not longer relevant.
In the age of Amazon, and the pandemic-driven acceleration towards online retail, providing consumers with just a wide choice of products under one roof, as Department stores have done for centuries, no longer has a unique appeal.
Retail stores of all sizes can only survive if they are able to create genuine destinations for consumers to spend their leisure time, and provide consumers with a compelling reason to visit, to spend money and most importantly, to return.
Whilst there is no doubt that physical retail will continue to play some part in the overall future retail mix, and that post COVID-19, the social aspects of shopping will return and renew, the balance has now tipped and online marketplaces of various forms, along with some physical showrooms, are likely to be the default route that major non-food retail brands choose to follow in the future.
To respond to these rapid changes in consumer requirements and shopping behaviours, existing retail brands need to implement turnaround plans much faster than originally envisaged. This requires not only strong leadership, vision, and commitment, but also investment.
For those national retailers still just afloat, but with huge and over-spaced store estates and ‘mid-market’ customer propositions, I would now immediately be looking to transform things through partnerships or other urgent strategic change. Any further delay will just postpone, but not avoid, the inevitable.
The challenge now for Debenhams landlords is that these Debenhams sites vary tremendously in both location, configuration, and age but there are some which will certainly be in demand. So, a variety of alternative (and non-retail) uses are likely emerge for some, but not all, over the coming months.
However, like the 160 BHS stores vacated back in 2016, there will be some Debenhams sites that remain unoccupied, particularly given the demand for retail space in town and city centres is now so much lower. Whilst over the past five years, more than 20% of the old BHS sites have been taken on by Primark, even they are unlikely to now require lots of extra stores in new locations. Primark may choose to cherry-pick up a few of Debenhams sites, if there are specific gaps in their estate, but that’s all.
There are already some interesting and illustrative, examples that might suggest some of the possible alternative uses for these ‘soon to be vacant’ 118 Debenhams sites, apparently equivalent in total space to 148 football pitches!
Last May, Next announced they would open five standalone beauty halls in some of the space already vacated by Debenhams in shopping centres owned by Hammerson. Next were seeking to extend their growing online beauty business (which already sells over 200 brands) into physical stores in key sites such as Bullring in Birmingham, Highcross in Leicester and the Oracle, Reading. At the time, Next said they were in discussions for a small number of other sites so again that’s now a real possibility.
It’s already been announced that Gravity Active Entertainment has signed a lease to take 80,000 sq. ft. over four floors of the former Debenhams store that closed early last year in the Southside shopping centre, Wandsworth. Its looking to reconfigure the space in an e-karting space, along with ping pong, darts, and pool as well as a bowling alley, restaurant and cocktail bar which will open this summer.
The prominent Debenhams store in Guildford has been sold to a London property developer for £20m. The huge 230,000 sq. ft 1960’s building is close to the city centre and has a significant frontage which overlooks the river Wey. There have been numerous possible suggestions about its future use, including mixed retail. homes including assisted living, hotel, or entertainment.
Finally, the freehold of the imposing 196,000 sq. ft Debenhams store in Nottingham, which occupies a prominent position overlooking the Old Market Square, was most recently sold three years ago. At the time, the new landlords specifically mentioned their acquisition provided ‘potential alternative use value’ and so this clearly suggests some form of redevelopment is now most likely, for example, luxury apartments, high-quality office space or student accommodation.
It’s still too early to predict exactly how things may eventually work out, but just like January 2009, when over 800 Woolworths stores across the UK finally shut their doors, January 2021 is already likely proving to be another key moment in UK retail history.