Retail

Independent businesses in Britain are coping with Covid better than big chains, data show


Independent businesses are weathering the Covid-19 pandemic better than many of the large chains that dominate Britain’s high streets, as they take advantage of falling rents and make greater use of online platforms.

New research from the Local Data Company shows that while the pandemic contributed to a net 1,833 independent shops, cafés and other high-street businesses closing in the first eight months of the year, 6,001 outlets of chain stores — defined as having at least five premises — shut.

The figures confirm a trend of the past few years, despite the impact of the pandemic and the accelerating shift of retail spend online.

The net closures represented 0.5 per cent of the total number of independents in Britain. But 2.8 per cent of chain-owned outlets closed. The pattern was consistent across high streets, shopping centres and retail parks and across every region.

“The latest figures . . . tell the story of an immensely challenging few months for the retail and hospitality sector,” said Lucy Stainton, head of retail at LDC.

“The independent market has fared better as these businesses have been able to be more agile, have a smaller cost base to cover during periods of little or no trade and have been able to take advantage of government support schemes,” she added, while noting that the four-week lockdown imposed on England from November 5 would bring additional challenges.

Column chart of Net change in openings showing Independent businesses are weathering the pandemic better than chain stores

Over three decades since the 1980s, retailers with multiple outlets grew to dominate high streets and shopping centres.

Leigh Sparks, professor of retail studies at Stirling university, said that societal change in the 1980s in particular — with heavy advertising designed to tap into rising spending power — aided their rise.

Large companies also benefited from economies of scale that allowed them to sell goods cheaper while outbidding smaller rivals for the best store locations.

But in the past decade, the rise of the internet has curtailed sales growth in stores, while rents and other costs have risen. “You don’t have to be in 300 or 400 top towns any more. Forty to 50 will do,” Prof Sparks added. “Having lots of stores has become a negative.”

Chains such as Debenhams, New Look and Arcadia have resorted to insolvency processes to try to cut their rent bills. Even financially solid retailers such as Marks and Spencer and John Lewis are closing stores.

From around the mid-2000s, there was also a growing consumer backlash against what one think-tank dubbed “Clone Town Britain”.

“Slowly but surely we realised that chains filling physical space with just more and more stuff was not enough,” said Mary Portas, a consultant and author of a landmark report on high streets for David Cameron’s government in 2011.

People’s gradual re-engagement with local retail and leisure businesses and the people that run them has accelerated during the pandemic, according to Ross Bailey, founder of Appear Here, which matches vacant space with potential occupiers.

“You’re seeing a renaissance of local streets,” he said. “The skate shop, the bike shop, the streetwear shop is as much about the people as the stuff.”

Independent operators are “more agile and have a better understanding of their local area”, said Lisa Hooker, head of consumer at advisory firm PwC. “There are very few big chains that can tailor their proposition to a local market.”

Landlords no longer assume independents are riskier tenants and in some cases are offering incentives to encourage them to take on vacant units.

Line chart of Large vs small retailers,  % of total GB non-food sales showing that independents have started to grow their market share

Covid-19 has also stimulated a big move online. Ebay said that during the UK’s first lockdown, the number of small businesses joining its platform more than tripled compared with the same period in 2019.

Data from the Office for National Statistics show that the proportion of non-food retail sales accounted for by larger companies, which tend to be chains, expanded from about half in the late 1980s to nearer three-quarters by 2015. It has since fallen back slightly.

Graham Soult, whose CannyInsights consultancy helps independent retailers get online, said there had “been a lot of determination and resilience” among small businesses and stressed that it was not always necessary to build a transactional website.

He pointed to a scheme in Durham that allowed shoppers to order from any of the city’s market traders and have goods delivered.

“The worst thing to do is go quiet,” he said. “You have to be out there, talking to your customers.”

However, the failure rate among independent businesses remains high. Ms Hooker pointed out that founders “have to do everything themselves” whereas chains can employ specialists in areas like marketing, finance or real estate.

But in many cases new businesses emerge to fill vacant units; the LDC data show that, although 20,019 units closed in the first eight months, 18,186 opened.

Almost three-quarters of independent units that closed were filled by another independent during the period, but only 14 per cent of chain businesses were replaced by another chain.

A closed and boarded-up Debenhams store in central London earlier this year © Tolga Akmen/AFP

Many experts expect the trend towards independent businesses to continue once the pandemic wanes; several surveys have indicated that consumers intend to shop more locally, more independently and more ethically.

Ms Portas thinks the pendulum has swung decisively away from “also-ran retail chains” and towards businesses more rooted in their local communities.

“People want this. It’s connected to our fundamental human spirit.”



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