Financial Darwinism in its purest form has hit the High Street. Two once-great names, Debenhams and Topshop owner Arcadia, are about to evaporate from our town centres into the ether of online shopping.
Much as we may lament their demise, it is inevitable.
In the great sweep of business trends, it is rare to be able to identify a precise inflection point when an industry changes for good. But when stores such as these disappear, it certainly looks as though we are witnessing a pivotal moment — and it is undeniably sad.
Shopping is an activity almost as old as humanity itself, and is so much more than a mere commercial transaction. The downfall of these much-loved businesses — even though they were long past their best — will leave both empty stores and an emotional void.
Two once-great names, Debenhams and Topshop owner Arcadia, are about to evaporate from our town centres into the ether of online shopping. Pictured: The business owners Sir Philip Green and wife Tina
For millions of British women, going to Topshop was a mother-and-daughter Saturday fixture, or a rite of passage in our teenage years, giggling in the fitting room with our friends.
Debenhams was the place for smarter stuff: that graduation frock or first interview suit and, of course, the pots, pans and plates for setting up home.
These shops are entwined with significant moments of our lives, so it is poignant when the shutters come down for good.
My prediction, though, is that we’re not witnessing the death of the High Street, but the start of a painful rebirth.
Not so long ago, it would have been unimaginable that pillars of the retail scene such as Debenhams and Topshop would be reduced to nothing more than fodder for online upstarts.
While they have suffered from the pandemic and the shift to online shopping, the real reasons they have been brought low are greed and grotesque mismanagement. The inexorable laws of capitalism mean that, sooner or later, these sins will be punished: and so it has proved. So although their demise will be a bitter blow, it does not sound a death knell for the High Street as a whole.
The seeds of Debenhams’ plight were sown back in 2003, when it was taken over by a trio of private equity firms: Texas Pacific Group, CVC and Merrill Lynch Global.
Debenhams (pictured, in Oxford Street) was the place for smarter stuff: that graduation frock or first interview suit and, of course, the pots, pans and plates for setting up home
Just three short years later, these firms cashed in by floating the store chain on the stock market, making back three times the £600 million of capital they had put in.
While their wallets were bulging, Debs had been bled white. At the time of its float, it was juddering under £1.2 billion of debt, which acted as a drag on its finances for years to come. The chain wrote off £300 million relating to that era as recently as two years ago.
The freeholds of some of the largest flagship stores were sold off — and Debs rented them back, in some cases at an onerously high cost. Stores grew dowdy and were starved of investment.
It was a classic example of asset-stripping, and it left the former grande dame of department stores helpless when the pandemic struck.
Avarice and financial engineering also figure heavily in the collapse of Arcadia.
Sir Philip Green and wife Tina bought the business for £850 million in 2002 — she is the official owner. After three years with her husband at the helm, Lady Green extracted a £1.2 billion dividend.
Her payout was largely financed by debt. Thanks to her residence in Monaco, she has enjoyed it tax-free.
The downfall of these much-loved businesses — even though they were long past their best — will leave both empty stores and an emotional void. Picture: Stock
If only that vast sum had been deployed to invest in the stores and the brands, the business could be looking very different today.
The Greens did not set about trying to make their empire fit for the future until far too late.
Only last year, when Arcadia had already fallen into administration, did Sir Philip Green lay out a blueprint to beef up its online offering.
These abject failures left both groups as cheap meat for predators. But it is primarily bad owners, who treated these stores as lucrative baubles, who are to blame for their plight, not the pandemic or online rivals.
Other well-known names have also fallen by the wayside in the past year, including Monsoon, Laura Ashley and Edinburgh Woollen Mill, and no doubt more will go the same way.
But to argue it is impossible for traditional stores to survive is simply not true.
Take Next. A favourite with young career girls in the 1980s and 1990s, it could easily have become another casualty.
The company, though, is still making chunky profits — albeit much lower numbers than before the coronavirus — and its shares have risen strongly in the past year.
How? Strong and enlightened management.
Sir Philip Green and wife Tina (pictured with their daughter Chloe) bought Arcadia for £850 million in 2002 — she is the official owner
Next’s chief executive, Lord Wolfson, is regarded as one of the best retailers of his generation, with a reputation for honesty combined with a long-term approach.
The antithesis, if you like, of the brash rag-traders embodied by Sir Philip Green, and a world apart from the vulture capitalists who pillaged Debenhams.
Wolfson has both invested and adapted to the changing retail scene. The online operations are top-class: some have dubbed them a ‘mini-Amazon’ and they propped up sales when the physical stores were closed.
Or look at B&M, a low-priced bazaar resembling the late lamented Woolworths. B&M made bumper profits in 2020 and its share price has soared. While others have been closing their doors and making staff redundant, it has opened new shops and created hundreds of jobs.
True, it has the benefit of having been allowed to remain open because it sells some groceries. But its real secret is that old-fashioned retail elixir: identify the goods customers want, and sell them at prices they can afford.
The point is that, notwithstanding the sad failures at Debenhams and Arcadia, there is plenty of potential life in the High Streets and shopping malls of Britain — once these infernal lockdowns are lifted.
Households have tucked away £100 billion of surplus cash and are itching to spend it. Once we have the corona-virus in retreat, the conditions are in place for a rapid and strong bounce.
The pandemic has brought home the need to reinvent our traditional shopping centres.The whole rotten system of business rates needs to be ripped up and replaced by a fairer levy. Online retailers should be taxed to reflect their turnover so they do not escape with tiny bills on multi-billion pound sales.
For millions of British women, going to Topshop was a mother-and-daughter Saturday fixture, or a rite of passage in our teenage years, giggling in the fitting room with our friends
Landlords will have to tear up exorbitant rent agreements. Huge rents turned many High Streets into identikit venues, lacking any individuality, because only the big chains could afford to pay.
Cheaper rents and rates could give an opportunity for a new and vibrant generation of independent stores and cafés to move in.
Those who fear the High Street is doomed to oblivion underestimate its capacity for reinvention.
Yes, the weak will be winnowed out, but new entrepreneurs will replace them.
Surfing a website, or soulless click-and-collect, is no substitute for the fun and the frisson of actual, physical shopping.
We have been deprived during lockdown. But when it ends, what better way to cheer us up than some retail therapy?