Is the British High Street finished as a buisness model?

Going, going gone... 

High Street shops are going, is the end of bricks and mortar retail?

We have recently seen BHS, House of Fraser and Toys R Us essentially go bust, Debenhams limps on ( I predicted it would be affected some time ago), the question is, is there any future in High Street retail outlets other than existing in the form of Coffee shops and Charity shops?

20 years ago I worked for a small but highly important supplier of food products to the major suppliers like Heinz and the leading supermarkets such as Marks and Spencer. This supplier had been bought and amalgamated with another supplier by an investment group to sell on.

A major manufacturing company bought the supplier I worked for and my thoughts were it was going to asset strip it for the brand labels and substitute the products with lower quality ones. I was proven right. Some key staff were retained due to their business relationships with the customer base, but the majority of staff were disposed of through redundancy due to duplication.

That was when the internet in the UK was in its early years.

20 years later and the on-line market place is where it is largely at. A supplier my present company deals with told me that 95% of their commerce traffic is now done on-line without any human intervention. This supplier has recently built a massive warehouse in Holland where no human staff are employed. Automation and robotics is the new now.

This is the new business model. 

When Toys R Us went bust a while back, I was shocked. This should have been a retail chain that should have survived, but it failed, as a casualty of super sites, like Ebay and Amazon - effectively the planet's middlemen.

Ebay and Amazon allow listing of items on their site, the same items often, the buyer makes a choice built on sales performance but mostly on price, the cheapest wins the deal. When an Amazon seller sells as a 3rd party supplier without the goods being in an Amazon warehouse, Amazon has a double win. It achieves a sale and revenue without the hassle and cost of storing, picking and transportation issues and takes a bit of revenue.

Plus it also helps if your company is based in a location with favourable tax levels and laws which the High Street mostly does not.

The on-line boom is good for some companies, but the convenience of on-line retail has taken its toll of the bricks and mortar brands, such as House of Fraser etc. 

The on-liners can operate cheaper, they don't have to have numerous shop floor staff on hand even when customer foot fall is slack, they don't have the multiple stores' business rates, running costs, staff costs, they can buy in cheap and sell quickly on, they don't have big rents or big leases to pay for.

This is why a House of Fraser type of takeover was a good deal, a lot of Bricks and Mortar that can be sold off, brands that can be cherry picked by a buyer and then sold on, the liabilities and overheads can be sold or disposed of largely quite easily and quickly and the future direction decided on whatever the buyer's plan is.

If you run a chain of stores for example with dated looking products, relying on peak time footfall, you are going to be hit hard. And that's why Debenhams is a walking Dinosaur.

People are 'time poor' these days and why waste hours going to a town to shop and try and find a parking space at probably some high price, when you can order on-line and return the item if you don't like it? Without leaving your house.....

That's why the High Street is sinking, those with the disposable income (pensioners mainly) are shrinking as a population - the pre WW2 generation had maybe 2-5 plus children in a couple 'generation', in WW2 it was about 2 per couple 'generation' and in the 60's on, the ability to choose a family or not has altered the demographic downwards with many couples choosing no family as an option.

Shrinking the 'generational population' has potentially shrunk demand consumption of goods for those original to the UK, but is buoyed by those who have come to live in the UK.

As we have seen even the mighty FW Woolworths could not survive the onslaught of the web. It wasn't 'Amazon big enough' to offer what people wanted or might want, it didn't have the floorspace or the warehouse space to be an Amazon.

Where can the High Street survive? Well, in my view, only niche shops offering specialised or unique products (where there is a market to service supporting it) could survive. If you offer a service that other on-liners don't, clearly this is an advantage.

The bottom line is customer footfall - the punter coming into your shop and buying a product. We probably buy on-line from places we have never visited, never will and develop trading relationships with people we are likely ever to meet over the years. 

Another key factor is how you deal with customer returns and warranty issues, the High Street business is good at that, they have the face to face contact to do so, but the faceless on-line retailer has to also do that too.

The High Street can't always better on-line price, it suffers from the overheads of staff, premises etc. On-line retailing cuts out human intervention to such a degree it more than pays for itself. If any humans work there, they are either packing the order or just booking the courier collection more than they may select the goods, depending on the set up.

Automation and robotics is taking over, algorythmical seeding is transforming marketing massively, sending the results to the iPhone or tablet, human intervention is shrinking.

When proxy living and big data get a hold and we subsume our 'daily dross' to computers to deal with, that will be a game-changer. The on-line situation will literally expand explosively.

Unless your High Street shop can offer something unique and or cheaper, pull the shutters down and sell up. 

Home deliveries Small Beer? Heineken doesn't think so, is this another blow to the High Street retail model?

Heineken, deliveries now reaching the parts other beers are apparently not

We have seen recently the demise of BHS, from a High Street presence to an ethereal on-line business model.

The loss at BHS of 164 stores and 11,000 staff, replaced by likely a single large warehouse and perhaps 100 staff in an Amazon-like model, shows how the jobs market is contracting and business is changing.

The writing is on the wall, you need an on-line presence or you are unlikely to survive, unless you have exclusivity and a loyal customer base. But you'd be in the minority.

The way business is changing its operating mode, is all contributing to the 9 million job losses by 2026 we are faced with, thanks to automation, robotics and changing business practice models, retail included.

The late Sir John Harvey Jones

an opponent of 'least cost option' business models

Lean practice 'least cost options' are the barrel scrapings that should be a wake up call to businesses, if they are in that state, then they are in trouble. If they are not growing and retaining staff, they should take note.

I see a fair number of the same jobs advertised time and again and the question is why? Is the company that prosperous and growing it needs to meet demands, or is it a crap place to work for and managed by tossers with no idea what they are doing?

Anyway, back to the script and here's a new business model for the on-line age.

Now Heineken is proposing home deliveries in the London area within 20 minutes of order, direct to the customer's home from direct sales on-line. Will other manufacturers follow suit?

So what impact will this have on the retail drinks trade, which I worked in many years ago and for other companies and retailers, how will this impact on their markets?

If successive drinks brands for example adopt this model, the small, independent wine and spirit retailers could be faced with the choice of going totally on-line or hanging on to their walk-in trade model, if that is viable.

My old drinks trade employer did home deliveries in the shop locales and also to local businesses and restaurants, this was back in the pre-internet era when life was so much less complicated. This business has since ceased trading.

We have seen chains such as Threshers, one of our old customers, cease trading too, perhaps due to the availability of drink sold through supermarkets, who have better purchasing power and greater opening hours availability.

If this High Street trade ceases, the questions will be what will happen to the old premises, the people who have lost jobs and the future for the High Street?

The answers look to be a growth in on-line living, proxy living will order your food and drink for you, jobs will be lost and alternatives needed and the High Street will cease to exist as we know it.

Basic Income Guarantee payment will have to come in to provide the financial safety net, perhaps people will be freed up to cottage industry styles of work.  

So we are now seeing the tangible results I have long been predicting coming into play. We must without delay review our way forward so that we can have some idea how we will live in the future.

These changes may like small beer today, but we are only seeing the start of things.

BHS goes on-line - why this makes sense - the cost savings are staggering and the model is bad news for the jobs market

BHS is no more on the High Street and is now going on-line.

What are the implications of this trend?

The shock news of BHS's demise has been compounded by the decision to relaunch this business, in an on-line format only.

This raises the question why, if it couldn't make the High Street pay? Because the High Street retail business model is becoming too expensive. Bricks and mortar, rents, staff costs, retail staff not selling all the time in the main.

Lets look at some costs and facts.

Shop assistants might largely not be engaged in selling

for most of each working hour they are employed.

Suit you...

If we show some basic figures, we can see the benefits of changing to on-line only retail model.

We will use the quoted figures from the BHS wiki page of 11,000 employees and 164 stores, all other figures are estimated and for example only.

If you had 11,000 employees on the High Street, On-line you might exist with as few as 100.

At an example of paying £15,000 per employee, this could cost you:

£165,000,000.00 for 11,000 employees at £15,000.00

£1,500,000.00 for 100 employees at £15,000.00

Big saving.

Operating stores 164, value estimate £82,000,000.00 in bricks and mortar

Warehouse operation, value estimate £3,000,000.00 as a big shed

Neither value includes retail stock. Based on outright ownership.

Big savings all round and headache for Landlords if only leased and you do not renew.

The largest cost of a business is staff, which is also its best asset, apart from a good product or service.

Bean counters preferring the 'least cost option' are going down the 'on-line' approach and scaling back the retail 'boots on the ground.'

Many retail place jobs are being advertised as part-time only these days and they are

'optimising the staff to be there when the customers are' as the key driver.

Unlike the motor trade which relies on big profits from single sales, they can afford to have someone hanging about for 63 hours a week on low pay as they will make it up on commission.

Retail in shops is a different animal. Usually, multiple sales of lower value products.

The jobs problem is being hit by a double whammy

Yes, the real casualty of the BHS crash was the 11,000 employees hit by the sudden loss of their jobs.

They are in a poor position, having to enter a job situation that has been slowly sucked dry over the years.

The problem is that by 2026, 9 million jobs will have been lost to automation. That will not happen all at once, but is happening right now and the effects are being felt greatly.

Even 5 years ago the jobs market was healthier than now.

The 'record job vacancies' level is a false flag, the victim of vacancies being multiply counted as they appear on multiple agency and job sites.

When you scale down a work force 90+%, that was a fair size to start with, that is a real problem for those looking to get employed and quickly.

Many of the jobs that were there 5 years ago just are not now.

A vast swathe of lower end jobs right up to degree level jobs have vanished.

And that is also the problem perpetuated by the out of date education system we have, which is running on an irrelevant sausage machine mentality model.

The jobs they are educating children for now just won't be there by the time they leave school. The technical skills needed to fill the skills gap are unfilled too.

Basic Income Guarantee  will have to take the place of Benefits

Because the jobs won't be out there to fill

The reality is that this creeping automation has been put to one side and not looked at, even though Norbert Wiener identified this situation as being likely over 60 years ago.

The Pick and Pack on-line model of retail is now the way things are going and it is sadly seeing off the High Street players one by one.

Are you being served? - BHS coming back as an 'on-line' business - A case of the Amazon's new clothes?

On-line retail - BHS now to go
down this E-commerce road?

Mrs Slocombe's Pussy has well and truly left the building.

So, BHS, one of the last of the big beasts of the High Street of old, is to come back as an on-line brand?

Well, its the way things are going. It's called the Amazon effect. A brilliant business model by the way. A virtual cave of wonderment, the on-line shopping portal.

Recently, I was talking to a business owner and he told me his biggest overhead was staff costs.

However, a business is only as good as the staff it employs, it was said, in the old days. But these days, they aren't employing, they are cutting back.

If they are employing, it is often at more peak time, peak footfall times for customers. And lots of part time jobs. Bad news for job seekers. And those already in retail.

Our shopping and living habits have changed over the last 50 years, massively.

No longer is the suburban housewife in her sensible M&S knickers perambulating the High Street with wicker shopping basket and sensible footwear to the local independent greengrocer, local food shop or dress shop, these days its all going down to cyber street, the Electric Avenue.

Think about your last 5 purchases? How many of these were made human to human?

Likely 3 out of 5 were made electronically, with you buying completely electronically without a fronted human interaction, with a real person.

This immediately starts to cut a swathe into working people's job prospects.

In the last 5 years, the jobs market has receded and changed immeasurably, almost invisibly. Jobs have fallen away as working and purchasing practices have changed.

That's the point. The High Street is becoming an electronically based e-commerce utopia, except its leaving the High Street for the virtual world. 

What you are mostly buying from nowadays, is an 'Amazon type model', a warehouse stock and despatch system, fronted by an attractive website. A robot.

That's the new reality. And this is why it works for a number of reasons...

As an employer, you need minimum staff, they don't have to be that educated, just able to pick and scan items, box, pack and despatch. Its all automated.

The computerised front end handles all your transactions, does the Math and presents you the customer, with the bill.

It automatically monitors stock, allocates stock and does the work of many workers, 24 hours a day.

It also alerts and can order new stock to maintain minimum levels, it can work 'Big Data' and communicate across many levels to suppliers and manufacturers even.

Also, this retail wonderment is often based on some industrial park, away from the high costs of a prime retail slot. Where the land is cheaper and the business related rental and purchase costs are too.

Another benefit to the on-line companies is the multiple 'buy and try' scenario, where people can buy a couple of sizes of a garment and return the ones that don't fit.

And in these size conscious days, a person of shall we say more 'robust' stature can try on things in their own home and feel better and under less pressure from a human assistant.

The warning here is, that this is the way that most of our retail is going to go if it hasn't already.

With lots of 'consumer porn' review and unboxing videos of items to hand on-line, either on websites or youtube, you can see up close what the items look like and this saves you the hassle of driving to the town, parking, going to find the item, which may not be in stock there and then driving home once purchased.

Think of what you saved, money, fuel and time.

So this is why this Amazon style model makes sense and more so when you consider the algorithmic add-ons  where you see 'you might also like' suggestions that tempt you to part with more of your hard earned. For the retailer, it is a 'win win' situation.

Grace Brothers is well and truly dead.

Mrs Slocombe's Pussy has well and truly left the building.

So what will happen to the High Street? I mean there's only so many coffee shops and charity shops it can accommodate?

So if you're a retail premises landlord, are you worrying? I would.