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.