Town centres like Ipswich facing crisis as Debenhams calls in financial advisers
- Credit: Archant
Town centres are facing a crisis that will require work from all sections of society – that is the blunt message from the chief executive of Ipswich Central.
Paul Clement is also helping to oversee Business Investment Districts (BIDs) in other towns and cities across the UK – and said the situation currently facing these areas is a structural and seismic change.
His comments come as speculation rises about the future of department store Debenhams – which has the largest shop in Ipswich town centre.
The company has called in accountancy and management consultancy giant KPMG to help create a rescue plan for a store group facing serious financial problems.
The department store sector has been suffering seriously over recent years – House of Fraser went into administration before being bought by Sports Direct owner Mike Ashley, while BHS, TJ Hughes an Allders have disappeared from the streets.
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Retail analysts agree department stores will find it very difficult to survive faced with the onslaught from internet shopping.
Writing in a regular column, Mr Clement says: “According to recent research by Savills, in 2018 so far over 2,500 units have been affected by retailer company voluntary arrangements, leading to a number of closures and reductions in rents.
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“Far from being sheltered from this, the east of England is the third most affected region in the UK after London and the south east. As a consequence, new store openings are slowing down and development and investment is being reviewed.
“This is not cyclical or simply due to the internet – it is structural and seismic and, until we appreciate that our town and city centres will never be the same again, we will fail to deal with it.”
Mr Clement added that while government can help by easing the financial costs on high street retailers, it was really up to local businesses and council leaders to find solutions.
The survival of a huge store like Debenhams was vital for Ipswich town centre – and Mr Clement pointed out that most individual stores in the chain, including Ipswich, were profitable.
There was no immediate threat, he added – but it was clearly facing financial pressures and Mr Clement said it needed to be supported by as many people and organisations in the town as possible.
Why are department stores so vulnerable?
Internet shopping has hit retailers in certain sectors hard – although it remains only a small proportion of overall sales.
According to the Office of National Statistics the proportion of retail sales online has gone up from 3% in 2007 to 17% in July this year. There is always a spike in internet shopping in November as shoppers take advantage of Black Friday offers in the run-up to Christmas.
Clothing is a sector that has been disproportionately hit by internet shopping – customers can guarantee they will find the exact size of clothes they want and can either get them delivered at home or collect them from their nearest store.
And mid-range clothing like that sold at Debenhams, Marks and Spencer or BHS is particularly vulnerable – with M&S the problems with its clothing sales have been eased by the strong performance of its food sales.
While budget stores like Primark and Peacocks have done quite well, although Peacocks did have a restructuring eight years ago, and up-market stores offering personal service have survived the recession retailers in the middle have struggled.
Large supermarkets like Asda, Sainsburys and Tesco now also offer everyday clothes at a budget price.
Department stores also traditionally did well selling household goods – but with fewer people now buying starter homes and having a investment in property, more people are happy to buy budget goods at Wilkinsons or B&M rather than higher quality household items at department stores.