A few thoughts on business models and alternative use of space

November 25 2016

Structural change in Retail – long clicks, short bricks…

  • Boohoo and Asos’ share prices speak for themselves but traditional retail has had a much tougher ride of late.
  • The department store sector is shrinking and the only winner is John Lewis.
  • When a newer, fresher rival is taking share in a contracting market, that spells big problems for the incumbents (Debenhams, Marks & Spencers, Next, House of Fraser).

Evolution and obsolescence:

  • Franco Manca has opened a unit in Debenhams’ site at Westfield Shepherd’s Bush.
  • This joins French Connection and Sports Direct concessions as Debenhams seeks to better utilise space.
  • M&S is closing 75 of its stores and is pivoting towards food.
  • House of Fraser has warned of a ‘volatile trading environment’ that is unlikely to change; distressed debt vultures have been snapping up its high yield bonds in Luxembourg.
  • This all begs the question: in today’s digital world, would you build a department store from scratch?
  • The answer is no.
  • Similarly, for Game Digital (aka. Game Physical Shops) –would you build an estate of 580 high street stores to sell digitally downloadable games?
  • The answer, again, is no.

 Excess pub space

  • Meanwhile over in the pub sector, Punch Taverns is looking to unlock value in its estate.
  • This has so far involved tie ups with Boparan’s Harry Ramsden fish and chip shop brand.
  • It is on record, along with Enterprise Inns, as saying it has underutilised space.
  • Think car parks, beer gardens, upper floors that could contribute more. Young’s has tackled this with its Burger Shack, for instance.
  • Langton has written of a capacity problem before; even with new sites slowing there is still plenty of slack in existing units.
  • As markets and consumers change, physical estates must be proactively managed.