As you walk down London’s Oxford Street, the “for sale” signs are hard to be missed. “Up to 50% off!”, shriek banners in shop window; “SALE: It’s big and it’s on.”
Almost everything on the high street is on sale. And the justifications for the promotions are also increasingly inventive. Some stores are still pushing a “winter sale”, others claim to be welcoming spring.
In House of Fraser, a “sample sale” just ended in handbags. In ladieswear there is an ongoing “discovery sale”. Racks upon racks of clothing are lined up from leading brands such as Ralph Lauren, Hobbs, Phase Eight and Karen Millen. Many items are marked between 20 and 50 per cent off.
“There are always sales going on here,” a shop assistant says. “I guess right now it’s the start-to-mid season sale.”
But something is missing from the scene. Where are the hordes of buyers, pushing over each other in their rush to get their hands on the discounted items?
“It doesn’t get that busy, because our sales are pretty regular,” confesses one bored-looking shop assistant in House of Fraser’s cosmetics department. On this sunny March afternoon, there are more shopkeepers than shoppers to be seen in the flagship central London store.
The constant flash sales and discounting could be seen as a sign of retail desperation, as the UK high street battles with some of the worst trading conditions in years. High prices and lacklustre wage growth are taking their toll on consumer spending, while stores are also facing stiff competition from the rise of online retailers such as Asos, Amazon and Net-a-Porter.
"The sales are a symptom of intensifying pressure," retail expert Richard Hyman tells The National. "Very few retail businesses are actually structured to be on sale, and yet these days, most of them constantly are.
“And while their management teams may try and persuade you to think this is all driven by what customers want to see, that’s rubbish. It is driven by retailers becoming increasingly desperate.”
House of Fraser sees itself as a natural alternative to Selfridges department store chain, but its heavy discounting undermines that image, argues Mr Hyman. “If you’re positioning yourself as an upscale, luxury department retailer, that’s not really very consistent with shouting ‘discount’ all the time.”
Nor is House of Fraser alone in this trend. Mr Hyman estimates more than half of non-food retailers in Britain have sales on at any given time. “This has been the case for the last three or four years, which is a new period in UK retail. I’ve never seen anything like this before.”
Last year, high street chains launched early Christmas sales in a frantic bid to lure in shoppers and boost numbers into year end. Hefty price cuts were offered by stores such as Topshop, Currys, House of Fraser and Debenhams, with sales running all the way from Black Friday at the end of November to Christmas.
Despite this, trading was sluggish over the crucial festive shopping period as British consumers tightened their purse strings amid an uncertain economic backdrop.
A range of retailers including Mothercare and Debenhams issued profit warnings following dismal Christmas sales, and predicted difficult conditions would drag on into the new year.
Those warnings were not misplaced.
Recent figures from Visa showed that shoppers continued to rein in spending in February, marking the worst start to a year since 2012. Consumer spending last month was 1.1 per cent lower than a year earlier, following on from a 1.2 per cent fall in January, according to the payments company.
The high street remained a key source of weakness with spend falling for the 10th month in a row, according to Annabel Fiddes, principal economist at IHS Markit, which compiles the data for Visa.
“Rising living costs, lacklustre wage growth and relatively subdued consumer confidence are all likely playing a part in the ongoing reduction in household spending,” she says.
Inflation soared in the wake of the 2016 EU Referendum, as the slump in the value of sterling drove up the cost of imported goods, denting consumers’ spending appetites and hurting wider economic growth.
As the pound staged a recovery in recent months, the squeeze on consumers has begun to ease somewhat. Official data last week showed that consumer price inflation on a 12-month basis rose by 2.7 per cent in February, a drop from 3 per cent in January. The gap with wages also narrowed, with pay growth ticking up to 2.6 per cent. The Resolution Foundation tweeted that next month’s figures should signal an end to the pay squeeze.
Even so, the UK’s inflation rate remains well above that in other western countries such as France, Germany and the US. It also remains a concern for the Bank of England, which has a 2 per cent inflation target.
Retail sales did improve slightly in February, with sales volumes rising 0.8 per cent in the month. But on a quarterly basis, they were still down 0.4 per cent, according to figures released this month by the Office for National Statistics. The data also only covered the period up to February 24, before Britain was hit by a cold snap that is likely to have kept shoppers at home.
Traditional retailers are also facing bigger structural issues such as the shift to online. Last November, the market value of Asos, a 18-year-old online fashion upstart, leapfrogged that of its 133-year-old rival Marks & Spencer. It was a historic moment for British retail, which was compared to that when electric car maker Tesla overtook US giant Ford last year. Online retail giant Amazon also outstripped Walmart in 2015 and now has a market cap of $770 billion, almost triple that of the veteran US grocery chain.
"Disruption from online sometimes feels like yesteryear's story, but the impact is still in full flow," Ameet Patel, senior research analyst at Northern Trust Capital Markets, tells The National.
“You can shop online, buy and try [and return if you don’t like] with increasing speed and convenience. At the very least, that means high street retailers need to have a very strong omnichannel offering, ie pick up/drop off points, stores designed to be well integrated with the online offering. At worst, it means in many cases the shop floor is nothing more than a shop window – take a look around, but buy elsewhere.”
Mr Patel says that if you want a guide for what might happen to UK high street retail, just look at American mall stocks such as Macy’s and JC Penny in recent years. “Their collapse basically reflects the effect of online disruption."
Indeed, the casualties on the UK high street are already starting to mount up.
In February, two leading chains – British electrical retailer Maplin and children’s store Toys R Us – collapsed into administration, underscoring the brutal trading environment on the high street.
Maplin, which operates over 200 stores in Britain and Ireland and employs 2,500 staff, admitted defeat after failing to find a buyer. Its boss Graham Harris blames its woes on a series of factors including the Brexit-battered pound and weak consumer confidence.
Toys R Us also announced that it will be closing all 100 of its UK stores after rescue talks failed.
This month, fashion retail chain New Look became another victim of tough conditions on the UK high street. The chain is to close 60 of its stores in Britain within the next year, due to its “challenged trading performance”, executive chairman Alistair McGeorge says.
And John Lewis, the department store giant that is often seen as a bellwether of the high street, announced three weeks ago that its annual profits had fallen a staggering 77 per cent.
House of Fraser, meanwhile, spooked the market recently after it emerged it had written to landlords seeking to reduce rents on some stores.
The move, which echoed actions taken by fellow retailer BHS just before it went bust in 2016, sparked concerns for the chain’s financial health as it struggles to revive high street sales.
Its Chinese owner is now in talks to sell a controlling stake in the business, less than four years after it picked up an 89 per cent interest.
A House of Fraser spokeswoman tells The National that, despite stake sale discussions, "it is very much business as usual" as far as the UK business is concerned.
A transformation plan is under way, she says, led by Alex Williamson who joined House of Fraser as chief executive last summer. As part of those plans, a new Web platform was launched after some hiccups, which is intended to help to drive online sales.
The rent discussions, she says, are about “trying to optimise the space we currently have” rather than about making cost-savings. But, she acknowledges, “the state of the market at the moment is not very good for the majority of retailers”.
What lies ahead for the British high street? Analysts generally agree that there will be further pain before the sector turns a corner.
"I see the gloom persisting for some time to come, as retailer costs will rise post-Brexit and sterling, even in the best case scenario, will in the short-to-medium term depreciate further," Jonathan de Mello, head of retail consultancy at Harper Dennis Hobbs, tells The National.
“More administrations are likely to follow, and there is definitely a ‘2008’ feeling in retail right now. It’s hard to say who could be next to fail, but the mass market fashion sector, and the leisure sector, are certainly ones to watch.”
Mr Patel, meanwhile, argues the structural problems facing retailers will result in a completely different look and feel for the high street in years to come.
“The death of the high street as we know it began a while ago, we’re just seeing the symptoms surface now. I expect we will see ongoing changes to the face of the high street for some time to come,” he says.
“I think the end game is that the UK high street ends up being mostly filled by stores that actually need a physical presence because they are selling something that can’t be sold online – such as hairdressers, salons, coffee shops, restaurants etc. And probably pickup/drop off points for ecommerce.”