House of Fraser’s battle for survival has put the spotlight not just on its future but that of the wider high street.
The latest episodes of the department store group’s saga of woes – a legal fight with landlords opposed to a CVA, now settled out of court, and an urgent search for new investment – came at the same time as the disclosure of Amazon’s latest UK corporation tax returns.
The comparatively paltry £4.5m paid by Amazon UK Services was down from £7.4m the previous year, while profits tripled to £72m. It deferred part of this year’s payment, so actually only coughed up £1.7m.
The coincidence of House of Fraser’s travails, the latest in a spate of retailer crises, has thrown the issue of a level business playing field for retailers into stark relief.
“Some of the criticism of Amazon is reminiscent of the ‘Tescopoly’ campaign that greeted the success of the giant grocer”
It prompted a scathing leader in The Times, headlined “Scamazon”, which accused Amazon of “making a mockery of the British Government, taking advantage of consumers and sucking the life out of high streets”.
It was an extraordinary intervention by a newspaper with such influence among the establishment and will no doubt have stung Amazon’s UK chiefs. But is it right that Amazon should be the whipping boy for other retailers’ problems?
No retailer has an automatic right to exist. Some of the criticism of Amazon is reminiscent of the ‘Tescopoly’ campaign that greeted the success of the giant grocer as it constantly broke new ground and extended its reach. But shoppers voted with their feet and headed for Tesco, whether to its category-killing giant hypermarkets or convenience stores.
Like Tesco before it, Amazon has succeeded because it has made shopping easier and cheaper for consumers.
It was a point made by Next boss Lord Wolfson last week. He told ITV: “Amazon does a great job for its customers. What we can’t argue is ‘stop this person doing such a good job for their customers’… we’ve got to be as good if not better”. Rather than fight change, he argued, the high street has got to change.
Killing the golden goose
Amazon has achieved its stellar success within the law. And it’s the law – the burdensome business rates regime being an obvious example – that is at the heart of some of the high street’s troubles.
The rateable value of House of Fraser’s Oxford Street flagship, for instance, climbed from £5.73m to £9m under the most recent revaluation – more from a single shop than Amazon’s tax contribution.
Paul McGowan, the boss of retail restructuring specialist Hilco and chairman of HMV, tweeted at the weekend that he was “sick of hearing [about] high street reinvention”.
He said: “The level of fixed-cost increases levied on retailers over recent years is the biggest disincentive for anyone to make the investment this would need.”
In his interview, Wolfson also said: “The one thing that I think the government must do is make rates more responsive to today’s reality.”
He argued: “The thriving towns and cities, we should be paying high rates, but the ones that are dying, actually that process of failure is being accelerated by rates that are stuck at levels that don’t reflect today’s reality.”
“Other retailers are constantly adapting, investing in the opportunity new technology brings and making the most of bricks and mortar”
Many of House of Fraser’s problems are of its own making. There was insufficient investment under Sanpower’s ownership and, unlike Amazon, it did not do a good job for customers.
Other retailers are constantly adapting, investing in the opportunity new technology brings and making the most of the complementary benefits brought by bricks and mortar – John Lewis and Next are two examples.
Their efforts, and those of other retailers, should by supported, not hampered, by policymakers who will kill the golden goose unless they act to make business rates more equitable.
This must include a fairer contribution from Amazon. Do it and its staff not benefit from the services that rates cover?