Should new businesses still be maintaining a physical presence?

Comet, Maplin, and Toys ‘R’ Us are all formerly major High Street brands in the UK that have had a sad demise during the past decade. Only the grim tale of the state of Britain’s bricks and mortar giants doesn’t end there. Add to the above list, names like Phones4U, JJB, Zavvi, and BHS and we have a list that is less of a consumer confidence crisis and more of a damning statistic.

The loss of these seven major brands alone caused an estimated 30,000+ redundancies nationwide, while some £1.5 billion GDP has been lost as a direct result, according to the New Economics Foundation.

2019 has begun with more warnings for the Great British High Street. Patisserie Valerie fell into administration last week; Debenhams is struggling with poor profit figures reported; House of Fraser closed more than half of its outlets in 2018 including flagship stores in Oxford Street and Cardiff; Homebase limps on having shut 58 stores at a loss of more than 2,000 jobs. Glorious retail names such as HMV, 98 years old in 2019 but back in administration, are still ascertaining how to survive the digital age to prevent becoming another giant of the past.

Which begs the question, should new small businesses even bother having a physical presence in the hope that they can cope with the various taxes and bills that they owe, or just opt for online?

Here are some reasons that suggest that physical stores on the high street are in trouble:

The rise of online competition

Amidst all the apparent doom and gloom, the success story of setting up a business continues. Official House of Commons business statistics show that 382,000 businesses set up during 2017, contributing to the 5.7 million businesses that make up around 99.3% of all private sector businesses in the UK. Both figures are near record levels.

And there’s plenty of appetite for more in the future. An Informi study has shown that half (50%) of the Millennial generation would like to one day run their own business, with over a third (35%) going as far as to call it a life goal of theirs.

So why the disconnect between the failures of large and well established businesses, and the keen hunger to become the big businesses of the future?

Well, there are plenty of winners in business for every loser, and there’s been a quite dramatic shift into the digital age in recent years. Businesses like Amazon, Google, Youtube and Airbnb will no doubt wish to continue their meteoric rises of the last decade and continue to be well established for many years to follow – indeed as well established as some of those fallen High Street giants that came before them.  And there’s been thousands of success stories on a smaller, but still highly impressive, scale.

Crippling business rates for bricks and mortar stores

While the job losses might be most acutely felt by big brands, the fact remains that many British High Streets are themselves dominated by smaller, family-owned businesses that have strong resonances and pride in their local area, whom they have faithfully served often for many generations, and across all industries.

In Brighton, which was named the best place to start a small business in 2018 by Informi, a vegan café was forced to relocate in December due to soaring business rates. Owner Georgina Archer told the Brighton Argus that the Larder, which had been open for four years, was closing due to rate bills of £860 per month, adding that the rates were “crippling a lot of small businesses, which is a shame because Brighton is well-known for having an array of independent shops.”

Sidmouth-based Hayman’s Butchers meanwhile told This is Money that they were one of only two surviving businesses actually paying business rates (the rest are charity shops, exempt from most or all of the rates) which cost his firm around £7,800 per year, meaning profit levels are “practically zero.”

It appears that the finger of blame is being pointed, by bricks and mortar businesses great and small, squarely at the doorstep of Government taxes – and not at the shift towards online-only spending from customers. The High Street may yet have a place if more businesses have a fighting chance of making a profit.

At the last Budget in October, Chancellor Philip Hammond outlined proposals initially announced at the Conservative Party Conference to introduce a new ‘digital services tax.’ The tax is in response to the heavy criticism being aimed at established tech giants, including Facebook and Google, who pay minuscule amounts of tax despite the vast amounts of UK users looking at adverts on their platform.

Consumers prefer digital – so should I bother with a physical brand?

To answer that question – Informi asked the real experts out there – people who are running their own successful business, or those operating at a senior level within others.  Informi has published blog posts for those in favour of new businesses adopting the online-only approach and those who think physical presences are here to stay.

Is the ‘out with the old, in with the new’ approach fair? Should we simply accept the gradual death of our High Streets as an inevitability with consumer shopping choices shifting, or should we do more to fight for our local shops?

This blog was first published on Informi,

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