Home News What future for Cumbria’s retail sector?

What future for Cumbria’s retail sector?

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Dickinsons in Carlisle

When the upmarket furniture retailer Chapmans pulled out of Carlisle in 2012, it was a blow to the city’s retail offer. But not for long.

Within months Dickinsons moved into Chapmans’ Siesta House premises in Victoria Viaduct.

As well as furniture, the new store was billed as having “the biggest collection of designer fabrics in the north of England” plus 8,500 wallpapers, 5,500 blinds and different types of flooring, and an in-house interior design service.

It became a “destination” attracting customers from outside Carlisle, and did a brisk trade after more than 6,000 homes in Cumbria suffered flooding from Storm Desmond in December 2015.

Yet Dickinsons, a North East business that dates from 1878, has just announced the Carlisle store’s closure along with its sister outlets at Hexham and Alnwick in Northumberland. Around 30 jobs are at risk.

For the last nine months, certainly the last six months, it has traded at a loss. If we don’t act, we will put the rest of the business in jeopardy.

Managing director John Spreadbury explained: “We’ve been closely monitoring the performance of the stores over the last three years.

“There was a spike in sales after the floods but in the past nine or 10 months footfall has dropped off a cliff.

“At the same time we’ve seen a rise in our cost base with increases in the minimum wage, auto-enrolment and higher rent and rates.

“The fall in the exchange rate [since the EU referendum] has had a big impact.

“Although we try to source from British suppliers, they use imported raw materials. We’ve seen price increases of around 20%. Some of that we’ve had to absorb because we can’t be uncompetitive.”

Increased competition from out-of-town retail parks has compounded the problem. This cocktail of rising costs, falling footfall and intensified competition prompted a change of strategy.

John said: “If you take the Carlisle store in isolation, we’ve managed to double its turnover in the last three years but with only a marginal increase in its contribution to the bottom line.

“For the last nine months, certainly the last six months, it has traded at a loss. If we don’t act, we will put the rest of the business in jeopardy.”

Going forward, Dickinsons plans to concentrate on profitable growth areas – specifically contract flooring for housebuilders, commercial and online.

Last year the business founded Dickinsons Commercial, focusing on interior design within the B2B sector, property redevelopment, new build and refurbishment across retail, hospitality, offices, student accommodation, care homes, holiday lets and stately homes.

Earlier this year it launched an e-commerce site.

Dickinsons in Carlisle

John added: “I read an article the other day that said, within five years, 20% of furniture purchases in the UK will be online. If you’d said that to me five years ago I wouldn’t have believed it.”

Once the stores close, Dickinsons’ sole high street presence will New England Interiors in Gosforth, which it acquired last year, and a discount warehouse in Prudhoe, which supplies flooring, beds and bedroom furniture.

The Local Data Company monitors store openings and closures, and the vacancy rate of empty shop units at towns and cities across the country.

Its latest Retail and Leisure Trends Report shows a collapse in the number of shop openings in the second quarter of 2017 – the figure is down by 84% compared with the same period last year.

Once closures are factored in, this resulted in a net loss of 207 shops.

Meanwhile, the shop vacancy rate, which had been falling from a peak of 14.6% in 2012 following the financial crisis, edged up to 12.2% in June.

That figure masks large regional variations. The vacancy rate is only 7.5% in Greater London, compared with 15.1% in the North West.

And there are wide variations within Cumbria. Workington has the lowest vacancy rate, 9.4%, followed by Whitehaven on 10.7%, Penrith on 11.8%, Carlisle on 12.3%, Kendal on 16.6% and Barrow with 21.4%.

Matthew Hopkinson, Sales and Marketing Director at the Local Data Company, believes that Brexit uncertainty, coupled with the squeeze on consumer spending caused by rising inflation, is a factor in the decline in shop openings.

He said: “There was a striking turnaround in the second quarter of 2017. The impact of Brexit is clear.

“Not only has the trend turned negative, with more closures than openings, but the volume of activity has dropped by 25%.  The vacancy rate started to rise and is likely to continue to do so if the current uncertainty continues.

“The changes in the first half of 2017 are a clear indicator of the uncertainty that permeates across all aspects of the UK economy.”

The rising popularity of online retailing is a factor too.

Some £133bn was spent online with UK retailers in 2016, a 15.9% increase on the year before. Indeed, 2016 was the eighth consecutive year that online sales posted a double-digit percentage increase.

I read an article the other day that said, within five years, 20% of furniture purchases in the UK will be online. If you’d said that to me five years ago I wouldn’t have believed it.

Analysts are predicting a 14% rise this year. That said, Matthew doesn’t believe that conventional shops will disappear altogether.

He said: “Physical stores continue to perform a vital role in the purchase cycle and consumer journey but the key questions remain around how many shops you need, what kind of format and in which locations.

“With rising costs everywhere for retailers, margins are being squeezed and therefore understanding these micro to macro location trends is fundamental for retailer success.

“Shorter lease lengths and more proactive management by landlords is likely to increase the number of openings and closures of stores and thus more fluidity in the UK’s high streets.”

The Local Data Company’s report also identifies trends over five years.

It finds that retail parks are performing better in terms of store openings than the high street, although they still account for only 2.5% of all stores.

Independent retailers have generated 89% of the net growth in shop numbers since 2013, with barbers and beauty salons leading the way. Numbers of convenience food outlets have grown strongly too.

Of all businesses on the high street, banks are mostly likely to shut although estate agents overtook them in closure numbers in the first half of 2017.

The findings come as no surprise to Keith Jackson, a researcher at the University of Cumbria’s Centre for Regional Economic Development, who has a particular interest in retail.

He said: “You have to have a reason to be on the high street now. For example, you can’t get a haircut online, you have to go to a hairdresser.

“If you’re a retailer you need to offer exceptional levels of customer service, that consumers can’t find anywhere else, to justify a high street presence.

“As an illustration, John Lewis are sending some of their team on London’s Oxford Street to stage school to learn how to meet and greet.”

Rents for retail premises have fallen since the financial crisis and Keith believes this is behind the revival of independent retailers who are often better able to provide the specialist, expert service increasingly demanded by shoppers.

He added: “No-one really knows where retail is going, and that makes it exciting. The model is changing rapidly.

“Look at supermarkets, which are moving away from large superstores to small convenience stores. A few years ago the idea that Tesco would adopt the franchise model [through its One Stop convenience store chain] to offer a more personal service would have been unthinkable.”

© Cumbria Chamber of Commerce

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