“You ain’t seen nothing yet” would be my response to the sad stream of retail ‘accidents’ we have already endured in 2018.

A company voluntary arrangement (CVA) is not a solution, but a last desperate throw of the dice by retailers that have failed to adapt to the new retail realities.

Their customers have moved on and are unlikely to return.

It is all well and good to make essential cost savings, but the real focus for survival has to be on the top line.

Retailers must evaluate the true cost of stores and invest in the viable ones if they are to have a future.

“This creates a catch-22 dilemma – if you have too many stores, you can’t afford the investment required to transform them into attractive destinations”

The retail-as-theatre concept was born back in the 1980s and its time has now come.

However, the necessary adjustment process by the vast majority of legacy retailers has barely begun and this creates a catch-22 dilemma – if you have too many stores, you can’t afford the investment required to transform them into attractive destinations.

The retail world has changed almost beyond recognition, and so must those stores that are to survive and prosper.

As with climate change, the debate gets focused on short-term weather trends rather than the inexorable dramatic long-term trends.

To illustrate this, I thought I would try to track the key measure of store productivity – sales per square foot – over the past 20 years.

Such analysis is, of course, complicated by the fact that nothing remains the same – Dixons, for example, is very different today from what it was in 1998.

Nevertheless, for what it’s worth, M&S boasted sales per square foot of £609 in 1998, and by 2017 this had fallen to £543. Not too bad, you might think?

However, inflation means £1 in 1998 equals £1.69 in 2017, while the proportion of food sales in the mix has increased from 38% to 60%.

A grocery retailer will achieve sales densities approaching, or often exceeding, £1,000 per square foot, subject to store size and the product mix.

Thus, the true decline is circa 55% from £1,029 to around £450! And the decline for non-food sales alone would be even more dramatic.

Let’s compare this with a retail success story, Next, where sales densities have declined from £614 in 1998 to £289 in 2017.

However, this is not primarily a reflection of the switch from ‘Retail’ to ‘Directory’, but the fact that average store size has risen from 4,000 to 15,000 sq ft.

By definition, the larger the store, the lower the sales density – thus, a department store such as Debenhams only achieved a sales density of £212 back in 1998.

It should also be noted that the increasing store size has enabled Next to reduce its rent to sales ratio from 7.7% to 6.6%.

“If legacy retailers are to move out of their current vicious circle, space must be reduced dramatically and transformed into exciting destinations”

In contrast, M&S has seen an increase from 1.3% to 3.2% – still very low thanks to its large freehold inheritance, and arguably one of the key reasons it has not followed in the footsteps of BHS etc.

In the face of these trends and the likely continuing shift of sales online, I find retail management worryingly complacent about its future space requirements.

If legacy retailers are to move out of their current vicious circle, space must be reduced dramatically and transformed into exciting destinations.

The retention of stores to act as collection points for online orders and the sub-letting of excess space to other retailers are second-best and flawed strategies.

The former is best dealt with by third-party arrangements, while the latter risks diluting and blurring your brand proposition and identity.

The correct strategy has to be to reduce both store numbers and configurations to the optimal trading level.