By elizabethh

If an industry leader says he doesn’t want his stores, what can we expect next?

The chief executive of Kingfisher has apparently just said that he’d like to close one quarter of his stores.
Ian Cheshire warns of store closures

My jaw dropped. Is this a really big retail company in serious trouble now? In recent weeks some well-known UK retail chains have foundered – HMV, Blockbusters, Comet, Jessops. The closure of Virgin Megastores announced in France was a shock too. But Kingfisher is a £11 billion turnover company with about 80,000 employees: in a different league altogether. I know that the retail economy is depressed across Europe, despite this month’s slight signs of improvement for some firms. Some more of those depressing statistics on falling sales were released by Eurostat this week:

Volume of retail trade down in the EU27

A closer look at Ian Cheshire’s remarks was more reassuring however – or was it? Mr Cheshire, who is both chief executive of Kingfisher and chairman of the British Retail Consortium, was making a point about the rising fixed costs of retail businesses, especially of business rates (property taxes). We’ve had some hullaballoo recently about how much tax various companies do, or do not, pay in the UK. Cheshire’s comments included an oblique reference to this by saying that his company does pay its taxes for the public good. His real concern however was the lower costs for online retailers, without those property taxes to pay. So was this all about the politics of tax, and the BRC chairman making sure that retailers keep up the pressure on government to support the business sector and stimulate growth? In one way, yes. But the dramatic comments about wishing he could close one quarter of his stores pointed at some fundamental problems. One of them is the lack of flexibility in the UK property market. The long term leasing system makes it difficult to respond to short term changes. The real punch came in the last comment however : he said that if he were starting today he’d start Screwfix (the online retailer) not B&Q (the stores based operation).

OXIRM has led research on e-commerce for many years. We are a long way from the small beginnings in the 1980s to the rapid growth in internet sales today. Those gloomy Eurostat statistics have a bright gleam in the growth line for ‘mail order and internet’ sales. Today seems to me to be something of a milestone however. If an industry leader says he doesn’t want his stores, what can we expect next?

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