The last 12 months have seen a string of High Street names go out of business. But what made 2018 such a bad year for retailers?
“I absolutely loved my job at Poundworld. It was like a family – we all got on, and we all stepped in if somebody couldn’t do a shift.”
Jenny Evans had been working for seven years as a part-time sales assistant when she heard the news on the radio in June that her company had collapsed.
It wasn’t just her job in the firing line – her daughter, Nicola, worked at Poundworld in Wolverhampton, too.
“We were gutted that it went under. But I had an idea – I worked on the deliveries and they were getting smaller and smaller. I had a feeling then,” she recalls.
“I was there when the shop was shutting. It was awful. People were coming in, wanting everything for nothing. The place was stripped bare.”
Jenny started working in retail at the age of 16. She’s now a cleaner in the same shopping centre where she used to work. Nicola is on a zero-hours contract at House of Fraser in Shrewsbury but that store is set to close in the new year.
Working on the shop floor in retail has never felt so uncertain.
In the three months to September, there were 93,000 fewer jobs in retail in the UK compared with the same period the previous year, according to the Office for National Statistics.
Two years ago, the British Retail Consortium warned there could be up to 900,000 fewer jobs in retail over the next decade – an industry that’s the biggest employer in the private sector.
That prediction is now starting to play out in what’s been a turbulent year.
Poundworld, Toys R Us and Maplin went bust and disappeared from British High Streets altogether. Other household names – Homebase, Mothercare, Carpetright and New Look – were forced into restructuring deals with their landlords, closing hundreds of stores.
And just days after Christmas, music retailer HMV went into administration. Its 125 stores are remaining open while the firm seeks a buyer, but having gone into administration once before just five years ago, the future – and that of their 2,200 members of staff – is in doubt.
“I think the UK in 2018 has probably seen the worst year that I can remember,” says Sir Ian Cheshire, the former chief executive of B&Q who is now chairman of Debenhams.
The weather, a traditional retail woe, hasn’t helped. First it was the “Beast from the East” shutting stores in an unseasonably cold snap in February. It was then followed by the heatwave and the World Cup which emptied stores. And most of us have not yet needed to stock up on winter woollies.
But there’s something far more fundamental going on.
Retail is in the midst of a massive transformation, an industry that is trying to adapt to our rapidly changing shopping habits.
Technology is driving this shift as we shop more online. One in every five pounds we spend is now via the internet.
Maplin, the electronic retailer, collapsed into administration later that same day. Its products could also be bought more cheaply and conveniently on Amazon.
Like Toys R Us, Maplin was laden with debt so when sales started to fall, their weaknesses were exposed. But it proved costly for employees. Across the two chains, 5,500 jobs were lost.
Other struggling retailers were also feeling the strain.
As well as grappling with the shift to online, retailers have been hit with an array of rising costs – from wages, the apprenticeship levy and business rates to new regulatory changes such as the introduction of Europe’s new data law, GDPR.
The weaker pound has meant retailers have had to pay more to buy the same amount of products from abroad – costs which have proved difficult to pass on to consumers.
Demand from consumers has been subdued. This combination is putting pressure on all retailers, but it’s those businesses with underlying problems which have suffered most.
There’s also been a big shift in how consumers prioritise where they spend their money. We’re splashing out more on what we do and less on what we wear.
Retail is getting a much smaller share of disposable income than it did a few decades ago.
Online sales are also pulling spending away from physical shops so it’s getting harder for traditional retailers to make the economics add up.
“If you take a typical shop, compared to 10 years ago you’ve got 20% less sales coming through the door. But you’ve also got the rest of the costs,” says Sir Ian.
“So you’re actually caught and squeezed between two different moves. Most online retailers are also investing in the online business as well. The [profit] margins have just disappeared for a lot of retailers,” he adds.