The High Street Faces an Uncertain Future Despite Forecasted Record Breaking Sales this Christmas

With the final week of festive trading upon us, many retailers are facing a make or break Christmas this year.

The Centre for Retail Research predicted high street Christmas sales are on course to be £680 million higher than last year, reaching up to £69.1 billion with online sales up by £2.1 billion, at £13.4 billion of the total.

The Office for National Statistics (ONS) show the value of sales (excluding fuel) up 3.3 per cent on November a year ago and also suggested it was an excellent month for online retailers – the average weekly spend online increased from £546.4m in October to £787.9m in November.

However, despite this promising outlook, many high street stores are left feeling worried as cut-price sales are slashing their profit margins and the British Retail Consortium says many shops will go bust early in the New Year.

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British Retail Consortium Director General, Stephen Robertson, said: “These ONS figures seem to fly in the face of retailers’ experiences on the streets. The evidence we’re receiving suggests consumers have approached this Christmas with great caution, reining in their spending in November and leaving it late to start their Christmas shopping.”

Earlier this month, the government published research that showed a third of high street shops are either ‘degenerating or failing’, saying that retail spending in town centres has fallen to 42% from 49% in 2000 and is projected to fall further to 40% by 2014.

This week struggling music, games and DVD retailer HMV produced a very stark response to the news that it had made a pre-tax loss of £45.7m stating:

“The economic environment and trading circumstances create material uncertainties which may cast significant doubt on the group’s ability to continue as a going concern in the future.”

Despite struggling to compete with cheaper online and supermarket rivals, HMV is hoping to save it’s business by restructuring  and focusing on technology related products including MP3 players, tablets and headphones.

Year on year, even the UK’s biggest and longstanding high street shops are failing to make a profit and so are closing their doors or moving online.

In 2009, Woolworths, one of the best known retailers in the UK was forced to close it’s 807 outlets after going into administration, however, the store was resurrected online after Home Shopping Giant Littlewoods Shop Direct bought the rights to the Woolworths brand name.

Retail expert Mary Portas recently published a report – The Portas Review, that stated the decline in British High Streets has reached crisis point with the high street model being outdated and in need of urgent change.

Portas has listed a number of suggestions which she feels will re-energise the high street and increase trading including free parking, cutting regulations for high street traders and the launch of a national market day.

The Portas Review and its recommendations has received mixed criticism yet despite any negative feedback the report has been successful in drawing attention to the fact that high street businesses are facing difficult times.

It also appears that where as previously offline and online divisions of a business once worked in isolation of each other, they are now joining forces and the expansion of services allowing people to order online and collect from local stores seems to be luring shoppers back to the High Street.

Retailers won’t know until January 2012 whether or not their profits during this year’s festive trading period will have outperformed previous years trading. What is clear is that where as online sales are growing steadily year on year, high street sales are not – the high Street is going to have to adapt quickly and reinvent itself if it is to have a sustainable future.

If you have any comments on the above please leave a reply below or email sinead [at] azam.net. You can also follow @sinead_azammkt on twitter.

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