Is high street retailing a thing of the past?

I was walking through Grafton Street (Dublin) last week – traditionally Ireland’s premiere shopping street and most expensive retail real estate – and I was shocked to see how few retailers were there. It’s been a while since I last walked down Grafton Street and I began to think about the changing retail landscape.

I am studying digital marketing at Dublin City University and one of the many facets of digital marketing is how it draws traffic into the online sales funnel.  The revenue from online over the past 20 years has been one of steadily increasing online sales, versus steadily declining high street retail sales. Retailers complain about people looking at a range of products in-store and then, once they’ve decided which make/model they want, they shop online for lowest price. Retail, it seems, is destined to be a show room, not a sales room for manufacturers that can afford high street space as a justifiable “cost of sale” in their business model.

One has to ask the question “if retailers disappear from the high street and shoppers have fewer places to see the product, how will this affect online sales?

With only large manufacturers able to afford this luxury, will it make market entry more difficult for new entrants?

With retail space so expensive, will this additional “cost of sale” lead to price increases?

Global manufacturers aside, what future is there for pure retail, i.e. shops that buy at wholesale price and sell at RRP?

A recent study has that youngsters do not do ALL of their shopping online and that they do still enjoy the retail shopping experience. One of the conclusions of this study is that “online retailers must develop a high street presence as well as online in order to attract young shoppers.”  http://www.intersperience.com/article_more.asp?art_id=21

And what future is there for Irish-owned retail, if only foreign multinationals can afford retail space?

With even ‘big brands’ finding it tough to justify the high overheads of the high street, is there ANY future for high street retail? It costs very little to set up an online store, whereas it is almost prohibitively expensive to do so on the high street. With parking restrictions, planning restrictions, commercial rates, high rents, legal fees and financial fees, who in their right mind would think about opening a retail shop in the high street nowadays?

Its not just here in Ireland that this trend is emerging, we’ve also seen top retail institutions such as Comet, Jessops and HMV disappear from the UK high street recently only to be replaced by ‘to let’ signs or pound shops. Of course, the recession has played its part in their demise, but online shopping has undoubtedly affected the performance of most high street regulars. http://www.fourthsource.com/ecommerce/how-retail-has-changed-online-vs-the-high-street-14859

As big brands predominate and online retail margins are squeezed ever tighter, is there ANY future for small, independent online retail? With a dearth of independent online retailers, will this prove to be a barrier to new or emerging manufacturers? Will the consumer be pressed for choice as the big brands push out the small, independent online retailers?

And what future is there for Irish shopping tourism, if Dublin’s premiere shopping street is dominated by multinational chains that one can visit in ANY capital city in the world?

In the face of a changed streetscape on a now unfamiliar Grafton Street, I began to question my perception of what is a retailer and what is a service provider? For example, almost all of the mobile phone shops are service providers, i.e. they are selling pre-pay and post-pay phone contracts. The phones are mostly sold close to cost price and some are even sold as loss leaders so, in practice, these shops are service providers and not retailers. Retailers selling white goods, brown goods, electrical goods and hardware/DIY have long since re-located to the ‘out of town’ retail/office parks. Brown Thomas is the only ‘department store’ left on Grafton Street.

So who is there? Who and what has replaced the ‘upmarket’ retailers of old?

There are several pharmacies (service providers with a retail element), several fast food outlets (service providers), several banks, FX outlets, tourist offices, ticket sellers and a bookmaker (all service providers), and lots of empty retail units to let – nine to be precise (numbers 6, 32, 38, 57/58, 65/66, 110 and 117).

In the formerly prestigious Westbury Mall (numbers 3/4, 5 and 26), Royal Hibernian Way (numbers 17, 22, 25 and 26) and St Stephen’s Green Centre (numbers 200A, 200B, 208/209, 214) empty retail spaces are disguised by window adverts and other distractions.

to let westbury mall

The side streets, too, are dotted with empty premises and for sale/to let signs.

Most of these units have been empty for five years or more!

This observation was made by a casual observer (me) just walking through Grafton Street.  The economic signs are there too but no one seems to be taking any notice of them. It reminds me of the Celtic Tiger years and the “ah sure it’ll be grand if we don’t tell anyone” attitude as the house of cards got higher … and higher … until it inevitably collapsed.

What will it take before people begin to listen?

  • 2002 – Grafton St 5th most expensive shopping street in the world (rent/sq ft)
  • 2005 – Grafton St 6th most expensive shopping street
  • 2006 – Grafton St 6th most expensive shopping street
  • 2009 – Grafton St 8th most expensive shopping street
  • 2010 – Grafton St 13th most expensive shopping street
  • 2011 – Grafton St 17th most expensive shopping street
  • 2012 – Grafton St 17th most expensive shopping street
  • 2013 – Grafton St 23rd most expensive shopping street

It might look as if Grafton Street rents are steeply reducing but it is slipping in the ranks because other cities are increasing their rents, i.e. most of the cities in these survey are many times the size of Dublin, have populations multiple times that of Dublin and their economies are not as badly damaged as Ireland’s following the financial meltdown of 2007/08.

Until the property owners reduce their ridiculous rents (and service charges) and Dublin City Council (DCC) reduce their equally ridiculous commercial rates, this trend will show no sign of abating.

The only route open to them to let to businesses previously considered ‘unsuitable’ or allow urban decay to set in. Simply increasing commercial rates to make up for the thousands of empty commercial properties in Dublin only leads to more business failures and/or business re-locations. DCC doesn’t seem to be able to grasp this simple economic fact.

I agree with DCC’s policy of not allowing charity shops into Grafton Street because soon there will be a glut of them because they have an unfair competitive advantage over normal retailers insofar as they have free stock, free staff, don’t pay tax or rates and some even receive government grants. Meanwhile, they continue to blight the surrounding streets in Dublin 2 and, with so little of their turnover actually going to charity, their commercial advantages are hardly deserved.

I wonder how long it will take for the people who can make changes to change their mind set … and facilitate change, as opposed to remain part of the problem.

A simple solution would be to apply normal commercial rates to empty properties and double them for every year the property remains empty.  The only thing that seems to change is the property agent and there seems to be a monopoly amongst the bigger agencies.

logo CBRE   logo JLL   logo lisney  logo Savills   logo Xavier McCaffrey   logo hwbc

Every ‘long term’ empty commercial property is a lost opportunity for an Irish entrepreneur!

Long term, the only ‘sustainable’ way forward for Irish retail property is ‘niche’ retailing and this will only happen if Irish entrepreneurs are given a start – otherwise online retailing will remain the ONLY game in town for Irish retail start-ups.

———————————-

May 3rd, 2014

DAFT.ie

170 retail units to let + 49 retail units for sale in Dublin City centre.

589 offices spaces to let +

 

 

Interesting links / articles

Grafton Street retail spaces for sale via NAMA

Shopping Online v The High Street

Are Online Retailers ready to invade the High Street?

Dublin City Council and their plans for Grafton Street

Bewley’s win case against landlord – its potential implications

Professional opinions on Grafton Street, via Architecture Planning Forums

Vernacular commentary, via Boards.ie

 

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