This is traditionally the time of year to look back at issues that have featured in the world of retail over the past 12 months. This year I thought I’d also highlight a few that we may need to look out for in 2018.
Recent revelations from ratings advisers Altus Group that nearly 16,000 stores have been lost over the past seven years shouldn’t come as much of a surprise to anyone who has been paying attention.
The real shocker was that, even though many former retail units have been razed or converted to other uses, the business rates value generated by those left has actually increased.
Since 2010 the number of shops have fallen by 3.7%, while the combined rateable value of those left actually reflected an RV increase of some £300m. This speaks volumes about how woefully disconnected local business taxes are from the damage they are doing.
In the nine years that I’ve been writing and campaigning on business rates reform, we’ve seen precious little change to our broken system, and little wonder.
Why would any government change a revenue stream that in the face of a declining market base, still generates an increase in income? Would that we could all jump on such a tasty gravy train!
We’ve been promised change for more years and more budgets than I care to remember now. The latest tweak to the system revealed by the Chancellor was the long overdue change from RPI to CPI to determine the annual rates hike, but even this wasn’t a new measure, just one brought forward by a couple of years.
Philip Hammond said the change would save businesses £2.3bn over five years. But in the context of the billions piled onto retailer’s bills over the previous seven and the new trip wires set by the VOA for anyone daring enough to challenge over-valuations, this claim is pretty tenuous.
Internet sales tax
But it was Sajid Javid’s comments amidst the budget post-mortem that worried me the most.
Javid’s plans to “level the playing field” between etailers and high street operators has once again raised the spectre of an internet sales tax.
As I warned in Retail Week a few years back, those retailers who look forward to seeing an online levy imposed should be careful what they wish for.
Such a tax will have less to do with balancing online and offline sales and will more likely become yet another way of squeezing the udder of the retail cash cow, particularly those that have managed to escape the clutches of an increasingly avaricious property market.
“As always in business, those that can adapt will survive, and retailers are some of the most adept survivors in the business world”
Speaking of which, the UK commercial property industry took a further lurch towards totalitarianism recently as Hammersons made moves to acquire INTU, thereby potentially creating the country’s largest property group.
This raises questions of monopoly landlords wielding ever more power in the face of a toughening market.
As if to underline these concerns, Starbuck’s landlords in the US took the hitherto almost unheard of step of enforcing the standard ‘keep open’ clause to prevent the coffee giant from shuttering their loss-making Teavana stores.
The explanation for such a move betrayed a level of desperation on the part of property companies and may signal similar moves here.
Even if such clauses were not practicably enforceable, a shrinking pool of landlords may provide them with far more leverage against their tenants.
Of course the retail landscape is ever changing and 2018 will no doubt continue that trend, but I think these are three of the most potentially worrisome developments that we need to be prepared to deal with in the near future.
As always in business, those that can adapt will survive, and retailers are some of the most adept survivors in the business world.
So on that hopefully more positive note, I’ll wish you all a great Christmas and happy and equally prosperous New Year.