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Christmas nightmare on the high street

The high street struggled over the festive period, what could it represent for the future?

Photo Credit: Ysangkok 

As the new term begins, the damaged high street limps off to a sluggish start after a painful Christmas season. Marks & Spencer, New Look, Debenhams and House of Fraser are all looking to close stores following serious falls in revenue. Sports Direct founder and major shareholder in Debenhams and House of Fraser, Mike Ashley, claimed November was “the worst on record” and “unbelievably bad” for retailers. He also got rid of both Debenhams’ chairman and chief executive in a dramatic shake-up of the company’s board after its share price dropped 15 per cent following the announcement of its disappointing season.

Mothercare, the retailer of baby and maternity goods, is expected to have closed 58 stores by March, since May last year. Even the employee-owned John Lewis failed to deliver a strong performance, which has led to uncertainty on their bonuses, leading to the first year it has suspended bonuses for its staff in 66 years. HMV went into administration three days after Christmas, making it the second time it has in six years, after yet another year of disappointing earnings that can be likely attributed, though not exclusively, to the rise in use of internet based stream providers such as Netflix and Amazon Prime.

Online clothing retailers did far better than their high street competitors with faring particularly well along with its other brands. But not all were immune to the revenue hit as ASOS struggled and was forced to release a profit warning in the run-up to the Christmas period. The British Retail Consortium released a report this month which stated 31 per cent of non-food sales are now being done on the internet which reinforced fears that footfall – the amount of shoppers physically entering retail stores – is likely to remain a persistent future problem. 

“A company like Shop Direct has around a million home pages and is tailored to reflect what you, as an individual customer, [have] bought in the past and your browsing history, your age and possibly the area you live, so it can target you with specific discounts and promotions tailored for you” said Richard Lim, Chief Executive of Retail Economics.

The data that online stores have access to is far more extensive, and they are also able to react faster to shoppers entering the site. Cookies that your browser gathers up mean advertisements on social media are even personalised to your interests and show you items you may have already viewed with discounts in order to complete the sale. Some shops managed out positively, such as Tesco, which enjoyed the best Christmas in nearly a decade. Morrisons attributed its own success to “increasingly savvy” consumers who shopped there for its competitive prices.

Other discount supermarkets such as Aldi and Lidl both secured strong sales in food, with Aldi making over £1bn over the period. As for clothing retail, Next had survived the Christmas period pulling ahead of its clothing competitors, despite resisting pre-holiday discounting which had some expecting it to suffer. It’s become clear this was thanks to its online shop, however, which did exceedingly better than its high street counterparts.

Could this represent an end to the high street? Unlikely, as despite having a bad season, the high street is still bustling with activity with the recent lack thereof, relating to fears on spending power due to the current inflation rate and Brexit uncertainty. On the other hand, retailers are likely to need to bolster their own internet platform if they want to compete with online shops that are growing at a much faster rate, and are predicted to continue this trend.

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