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Why retail store closures don’t have to be bad for business

Richard Oldfield, construction director at Sigma, explains how the implementation of a store closure and decommissioning process can increase operational efficiency and reduce costs for the industry

It is no secret that the retail sector is facing somewhat of a crisis, with a number of leading retail chains – including Arcadia Group, M&Co, Harveys Furniture and Monsoon, amongst others – entering administration or shuttering up for good in the midst of the global pandemic. 

While for many retailers, the thought of closing stores completely is abhorrent and a prospect that brands must desist from, for some it is a seemingly unavoidable conclusion. Indeed, conventional wisdom suggests that when a retail store closes, it will present enumerable challenges for brands and have a decisively detrimental effect which is felt by all the areas of business. 

The major challenge for retailers, however, is often not the closure itself, but rather managing closures in a way that maximises revenues and profits, and generates additional capital that can be invested in other areas of the business.

The reality is, that in certain circumstances – if managed correctly – the closure of stores can actually be good for business. As such, as retailers continue to traverse the challenges of a much-changed landscape from a traditional to a modern commerce retailer, it is essential they take a proactive approach to such events.

Taking the proactive approach

By acknowledging that change is occurring, and engaging with key stakeholders, brands can begin to explore the options available to them to ensure a smooth and cost-effective transition.

For those businesses that simply cannot afford to continue trading due to debt and/or the inability to generate or borrow cash quickly enough, entering administration may be the only option. As part of the process, it is important brands engage with the administrator to understand the value of the business. By doing so brands can leverage their assets, inventory and business to repay creditors and try to safeguard the continuity of the business.

Whether planning store closures or exploring alternative options such as multi-occupancy or multi-purpose facilities, the period leading up to any closure, and the closure itself are two critical times during which the landlord should be consulted.

An experienced landlord can assist not just with store closures, but with the wider scope of any works that may be required. Whether that is with rent reductions, negotiating new or terminating leases.  

Often overlooked, physical stores have realisable assets, that can be identified, asset tagged and re-utilised or refurbished to maintain the wider chain, or sold to mitigate costs of closure.

Flexible spaces

For those agile enough to respond to shifting consumer behaviours and effectively redefine the experience and omnichannel service they deliver for shoppers, there are significant opportunities to remain profitable as the high street recovers.

On a larger scale this may mean integrating new services or converting stores into local click and collect hubs. Brands such as Amazon have even gone as far as launching futuristic “contactless” stores where shoppers will be able to pick up items and walk out of the store without the need for a till.

Retailers have even sought to re-imagine spaces to create experiential retail concepts, be that by integrating cafes or restaurants into existing outlets, or even selling parts of their store portfolios in order to produce more flexible commercial spaces. John Lewis, for example, was recently given the green light to convert almost half of its London flagship store on Oxford Street into office space, as it scurries to return the business to profitability

Of course, achieving such a level of transformation is not always feasible and often more undesirable options must be considered. Where store closure or repurposing is being explored, there are numerous opportunities available and it is often imperative that early action is taken should it seem unlikely that a business will be sustainable in the future. 

Closing part of a store portfolio and transferring stock to the remining stores as part of a rescue strategy is one of the most common options available to retailers. While selling part of all of the business as a going concern, or placing the business into insolvency as part of a closure strategy may need to be contemplated should circumstances dictate. 

Regardless of the choices to be made, being able to call upon a partner with over 20 years’ experience in transforming spaces, can ensure a smooth, professional and cost-effective resolution to store and estate re-balances. For more information, visit: www.sigmagrp.co.uk


Richard Oldfield is construction director at Sigma

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