After Topshop owner Arcadia’s demise, what now for UK clothes shopping?
Sir Philip Green’s fashion empire Arcadia is no more, with its famous brands, including Topshop, carved up by online retailers leaving behind a ghost chain of 500 shops.
The sale to Boohoo of its last three high street names – Dorothy Perkins, Wallis and Burton – was confirmed this week. It completed the dismantling of Arcadia, which under Green’s ownership was the last vestige of the Burton Group built by 20th century retail trailblazer Sir Montague Burton.
Its demise raises big questions about the future of clothes shopping in the UK. People are going to be “quite shocked” when they go back to the high street, says Jane Shepherdson, who as brand director of Topshop in the early noughties was the most powerful woman in British retail.
“I don’t think people have realised what it is going to be like,” she adds.“If you think about the main high street in a city centre, there is a lot that has gone.”
The Arcadia store closures follow hundreds of clothing store closures last year with fashion shops, after betting and mobile phone stores, the most common type of retail unit to shut in the first half of 2020, according to the Local Data Company.
Why are UK high street retailers in trouble?
Physical retailers have been hit by a combination of changing habits, rising costs and broader economic problems as well as the coronavirus pandemic. In the past few years names such as Mothercare, Karen Millen, Toys R Us, Maplin and Poundworld have disappeared from the UK high street as a result.
In terms of habits, shoppers are switching to buying online. Companies such as Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores.
At the same time, there is a move away from buying “stuff” as more people live in smaller homes and rent rather than buy. Uncertainty about the economy has also slowed the housing market and linked makeovers of homes. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit and the coronavirus, have coincided with economic and political uncertainty that has dampened consumer confidence.
Retailers with a high street presence want the government to change business rates to even up the tax burden with online players and to adapt more quickly to the rapidly changing market. They also want more political certainty as the potential for a no-deal Brexit means some are not only incurring additional costs for stockpiling goods but are unsure about the impact of tariffs at the end of 2020. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges, which they say put off shoppers.
In the December 2019 Queen’s speech, the government announced plans for further reform of business rates including more frequent revaluations and increasing the discount for small retailers, pubs, cinemas and music venues to 50% from one-third. It has also set up a £675m “future high streets fund” under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.
The Covid-19 crisis had a dramatic impact on spending in 2020. Clothing and footwear sales slumped by a quarter and for the first time more than half of the £40bn spent by shoppers was online.
While the balance of power will tip back towards physical stores once the lockdowns end, analysts at retail consultancy GlobalData expect that more than 40% of fashion and footwear will continue to be bought online, compared with less than 30% pre-pandemic.
Older chains with large store estates which had not invested enough in home delivery and online channels have suffered the most from the swift sea change in shopping habits.
Green bought Arcadia Group for £850m in 2002 and banked a £1.2bn dividend three years later, which remains one of the biggest pay cheques in corporate history, leaving the company with less to invest on keeping up with events.
At the time, Green was able to boast of a 10% rise in profits at his fashion empire which had 2,000 outlets and the prospect of a global brand in Topshop. By the time it fell into administration last year Arcadia was making losses, its store estate cut to 500 stores and Topshop but a shadow of the “It Girl” it once was.
The history of Arcadia Group
When Sir Philip Green bought Arcadia, the retail group behind brands such as Topshop and Wallis, for £850m in 2002 he was already known as the king of the UK high street.
Green made his fortune by breaking up Sears, the group which once owned the Freemans catalogue and Miss Selfridge, before buying BHS in 2000. He became a household name after his family collected a £1.2bn dividend from Arcadia in 2005, the biggest corporate payout in UK history.
But in 2006 Topshop supremo Jane Shepherdson, the woman who put the brand on the fashion A-list, left amid rumours she was unhappy with Green’s management style. Her exit came just as Topshop teamed up with Kate Moss.
The Croydon-born model helped front Topshop’s expansion into the US in 2009 where Green pledged to build a billion-dollar business. Three years later US private equity firm Leonard Green bought a 25% stake in Topshop for a reported £350m.
Topshop and Arcadia’s other brands were slow to adapt to online shopping, however, and faced increasing competition from cheaper rivals, including Asos, H&M and Primark. AS sales fell, the group’s pension deficit rose. The collapse of BHS in 2016, shortly after Green had sold it to a serial bankrupt for £1, also dented his reputation.
Arcadia recently bought back Leonard Green’s stake in Topshop for virtually nothing. The group warned it could collapse if landlords did not back a rescue plan involving closing 50 stores and rent cuts. The plan was approved after landlords were promised a 20% stake in any sale of the business. The Green family also pledged to pump £100m into the group’s ailing pension scheme.
Montague Burton must be “turning in his grave”, says Stuart Rose, the former Marks & Spencer boss who sold the then listed Arcadia to Green. “No brand has got the right to live forever but it could have had a better maturity than it has had. It is a sad end.”
However, to argue that retail is facing an existential crisis due to Covid-19 is to forget previous shocks such as the 2008 banking crisis and inflationary crises of the 1970s and 80s, says Rose.
“During every one of those eruptions there has been a shakeout and mostly what has happened is the weaker have died and the stronger have survived,” he explains.
In all likelihood no more mega shopping malls will be built and the high streets of the future will have fewer shops on them, but Rose says people “aren’t stopping shopping”.
“Arcadia and Debenhams have gone but the people who are left will probably do OK because there will be a bit more to go round.”
The carve-up of Arcadia prompted online fashion retailer Asos to snap up Topshop, deemed the jewel in crown, as well as Topman and Miss Selfridge for £330m. Boohoo paid £25m for the trio of Arcadia’s lesser brands.
Manchester-based Boohoo also recently bought the Debenhams name, again shorn of its 124 stores and army of 12,000 shop staff. It too was also once part of the Burton Group, in its day a FTSE 100 company.
Debenhams might be disappearing from the high street but rival chain John Lewis says shops have an important role, especially when it comes to fashion, with shoppers heading to stores to seek out advice from its personal stylists.
We get a “certain joy” from visiting our favourite shops, says John Lewis’s head of womenswear, Jo Bennett, who says customers like to physically browse clothes and shoes when they are putting together an outfit. “Many of us are looking forward to going out and shopping again.”
Terrible job losses aside, some of the brands disappearing from the high street were “not good enough for what we need now … and usually just made white men rich”, says retail guru Mary Portas. “Lots of people got made rich doing stuff that wasn’t exactly brilliant. I think we are going to see less but better.”
Although the online-only deals for Arcadia’s brands might suggest otherwise Portas believes teenagers and twentysomethings still want to buy clothes from shops.
“They just don’t want bland,” says Portas pointing to the busy stores of streetwear brands such as Supreme. “They have a cultural resonance and relevance to what’s happening today. They have put soul into the physical space and that is what we need to do.”
Shepherdson agrees that high street retailers will have to “up their game” to attract shoppers after the pandemic.
“I love shops myself,” she adds, explaining part of the thrill for fashion lovers is “seeing what other people are wearing”.
“It is really dull shopping online. I want instant gratification. I can’t believe that people don’t still love the social aspect.”
The shift to online shopping has left the UK with too many stores and even after the carnage wrought by the pandemic it is estimated there will be 25% more retail space than required.
In the future fashion shops might be less prevalent in town and city centres but analysts think they might spring up closer to home amid what looks like a permanent shift to home-working for many.
“If more money is being spent locally then we can reimagine what a local high street might look like,” says Lorna Hall, head of fashion insight at WGSN.
The darkest hour is just before the dawn, with Bank of England policymakers predicting Britons will go on a mammoth spending spree once restrictions are lifted.
“I suspect there is pent up demand because people have been saving money and they will want to get out,” says Rose. “There is a limit to how much you want to just browse through another bloody website.”
Source: Read Full Article