DESTINYSCORE: The health of the UK’s high streets.
As the UK’s high streets change rapidly in the face of shifting consumer trends and digital disruption, retailers need the right insights at their disposal to help inform their retail store location strategy.
To this end, Javelin Group has developed a new report – DESTINYSCORE – to add to its portfolio of retail location intelligence tools, which anticipates the future trajectory of UK urban centres, based on retail, consumer and macro-economic forces.
DESTINYSCORE’s hypothesis is that a strong and sustainable retail offer in a town centre location is the function of a range of factors. Each high street is measured against these factors and categorised from stable to challenged. Stable venues are those with the most positive outlook, whereas challenged venues are those where a significant downturn has begun or a difficult future may lie ahead.
Although DESTINYSCORE focusses on quantifiable factors, qualitative local factors (outside the scope of the study) such as heritage and community, can also play an important and influential role in a town’s fortunes.
It’s unsurprising that the report confirms a swathe of retail venues cutting across the UK will become increasingly threatened by the deep changes that are impacting retail globally, and the North/South divide in the UK is alive and well with a high proportion of challenged venues in the northern regions.
But, there is also good news – five years on from our original study, we find that, whilst structural change in the retail sector at a national level may be irreversible, local outcomes continue to vary.
Where regeneration, investment and community-led initiatives have occurred, many venues have experienced a shift in outlook, representing clear changes in the towns’ fortunes and future prospects.
For example, venues including Richmond (Yorkshire), Nantwich and Hereford have moved from being classed as challenged five years ago into most stable in 2017. Many of those urban centres showing improvements have benefited from targeted investment that has fuelled rejuvenation, resulting in increased occupancy rates in retail, F&B and leisure, which has consequently helped to stabilise the status of these venues.
Similarly, major conurbations can buck the overall trends of the region in which they are located. Edinburgh is a prime example – with 30% of venues assessed within the conurbation classified as most stable despite Scotland ranking amongst the UK’s most challenged regions. These extreme disparities within regions may require a more radical redistribution of regional investment funds to address the imbalances.
For retailers, DESTINYSCORE can identify stable and challenged venues across the store estate, and help retailers to focus their attention where it is most needed.
- How is our current LfL performance tracking against venue health?
- Which venues will deliver acceptable sales and profit returns over the next five years?
- Where should we fight hardest at lease renewal?
- Are we using the best analysis and data to help us understand changing local market dynamics?
- Are we taking the right actions today to give us the right store footprint for the future?
We have assessed the store portfolios of 200+ leading UK retailers (each with 50+ stores across the urban centres assessed), identifying those with the most significant bias in their store estate towards challenged venues and those primarily located in stable urban centres.
The list of retailers with high exposure to challenged venues is dominated, perhaps unsurprisingly, by value-oriented formats. However, the question remains whether these venues can continue to attract sufficient shopper numbers to the high street to provide attractive long-term opportunities for these well-adapted formats.
Retailers in these types of locations may need to be thinking about moving to shorter/more flexible leases to provide protection, reducing footprint into smaller store formats and/or managing their operating cost profit carefully. Our experience with many retailers trading across a wide cross-section of location types has tended to confirm this hypothesis with lower growth being consistently delivered out of the most challenged venue classifications, irrespective of the positioning of the retail format.
Whether a retailer’s store estate consists mostly of challenged or stable venues, or a mix of the two, this kind of insight is extremely valuable in understanding the direction of travel of each venue and can be used to strategically inform the future shape of the store estate.
For developers and investors, DESTINYSCORE can highlight the long term commercial viability of venues and consider strategic investment in retail assets.
- Is there latent growth potential? Is there a viable turnaround opportunity?
- What local competitive threats exist?
- Can proactive asset management deliver a more compelling commercial proposition?
- Can we communicate a compelling message to local shoppers and target retail tenants?
For Local Authorities, DESTINYSCORE shines a light on those administrative areas that may require the most proactive management.
This could be either to remain commercially viable as retail destinations and/or to plot a course of transition towards a more multi-functional town centre environment with retail becoming a less critical element of the wider urban mix.
This is particularly true for venues that have remained challenged retail destinations for the last five years and continue to be so. In these instances, some local authorities may choose to manage decline in favour of their more stable options. In these venues, local authorities must act strategically, investing proactively where sustainable opportunities can be demonstrated or where political necessity insists.
However, given the national scale of change required, it may not be sufficient or optimal for local authorities to act independently to protect their urban centres. A more strategic region-based approach may be necessary to deliver more sustainable long-term outcomes.
There is certainly no quick fix here, but rather, the findings from this study highlight the need for proactive and strategic intervention from retailers, developers and investors, and local authorities.
DESTINYSCORE should serve as a call to action for some, perhaps a warning to others. Either way, complacency on the high street is not an option.
To read the full report DOWNLOAD White Paper: DESTINYSCORE – The health of the UK’s high streets.
For further reading on this topic, read our blog The hidden impact of improved retail store location planning.