Jenny McCallThe pressure facing the retail sector was highlighted once again yesterday when US fashion giant Gap confirmed that it would close all its stores in the UK and the Republic of Ireland and focus on online operations.
In a statement, Gap said it would implement a phased approach to closing the 81 stores, which would take place between August and the end of September. It’s still not known how many staff would be affected. But Gap confirmed that this is not an exit from the UK market and its online presence would be key.
Retailers move online
The changing face of retail is something that has been taking place for many years. In 2016, PwC estimated that 2,656 UK shops closed in the first six months of the year at a rate of 15 a day. By 2021, there were 17,532 store closures according to PwC and only 7,655 store openings, setting a record net decline of 9,887.
While many may believe COVID-19 has contributed signifcantly to this slide, the affect of the pandemic coupled with the emergence of companies that only have an online presence has caused some to signal the death of the high street.
After Sir Philip Green’s Arcadia Group went into administration last year, online fashion retailer ASOS purchased the group's online websites, which included Topshop, Topman and Miss Selfridge.
In the UK, nearly one fifth of consumers are doing “most or all” of their shopping online – 33% higher share than in the US. And UK online sales have been growing almost ten times faster than offline sales, according to research conducted by consulting firm McKinsey & Company.
Landscape is changing
In such a situation, Gap’s online transition seems inevitable. Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, told Capital.com: “In this changing retail landscape and with so much shopping shifting to online, shedding expensive rents makes sense for the company, particularly given the success of online-only fashion rivals.
“ASOS has already rifled through Arcadia’s bargain bins to take Topshop, Topman and Miss Selfridge digital. Boohoo has scooped up Debenhams at a knockdown price for an online future.”
While some may lament the closure of so many high-street shops, the growth of online shopping – and e-commerce in general – during the pandemic should not be ignored.
Patricia Baker, retailing director at Global Equity Research, said in a recent interview: “We have seen that initial resurgence of retailers offering online services and those trends continued through to 2020 and we continued to see very strong online sales. Online presence has been a lifesaver for many stores, and we continue to see very solid online growth.”
She added: “Canadian Tyre, a company here in Canada is the perfect example of a business that pivoted from offline to online very quickly.”
Bricks and mortar still needed
Despite the closure of Gap stores in the UK and other retailers pivoting to have an online presence only, analysts are not completely convinced that this is the end of high-street stores.
Clothing giant Primark, which is owned by parent company Associated British Foods (ABF), recorded double digit growth yesterday in its trading update. Primark famoulsy only has a pressence offline and does not have an online store.
“Primark, one of the big fashion chains left standing, is likely to clean up from Gap’s exodus, attracting browsing shoppers whose options are dwindling,” said Streeter. “It is still turning heads on the high street, while one by one other fashion retailers fall by the wayside.”
According to Baker, there is still life in physical shops. “My view is that bricks and mortar will still remain very important and that is seen with the reopening of stores, now that lockdown restrictions have eased. The consumer has turned into an omnichannel shopper using online and offline,” she said.
