Could the ‘service retailing’ trend boost fine food shops amidst rising vacancy rates?

Retailers continue to face cost pressures as new data from the British Retail Consortium (BRC) highlights growing vacancy rates. Over the past five years, 6,000 retail outlets have closed shop, according to the BRC’s data. 

The high street was hit the hardest in the second quarter of 2023, as the overall vacancy rate in Britain reached 13.9%, 0.1 percentage point worse than the previous quarter. The situation was brightest in Greater London, the Southeast and the East of England, which saw the lowest vacancy rates, while the highest were recorded in the Northeast, Wales and Scotland.

Fine food holds the key to success

Independent retailers, particularly those in high street locations, are facing tough pressures, according to Lucy Stainton, commercial director at Local Data Company. “The high street has seen some of the most notable impacts, with rising rents and increased competition putting pressure on small and independent businesses, who may struggle to meet high operating costs.” However, no retailer seems to be immune now. “Across all location types, vacancy has reached critical levels, highlighting an ever-increasing need to redevelop units to breathe life back into retail destinations,” she added.

Despite the pressures, is there reason to be hopeful for fine food retailers? Andrew Goodacre, CEO of Bira, the British Independent Retailers Association, believes the sector has unique skillsets that will help it to thrive.

“The figures from the BRC are very sobering and highlight the difficulties faced by shop owners – both large and small,” Andrew told Speciality Food. “Some of the losses will be due to high-profile business failures, and some will be down to large businesses changing their business model as they focus on the internet and an omni-channel approach to retailing. 

“We also know that many smaller, traditional independent shops have closed, but been re-opened as barbers, nail bars, etc. showing a switch to ‘service retailing’. This trend should benefit the fine food retailers who can combine great products with a strong service/experience offering,” he said.

For example, fine food retailers could host wine and cheese events or showcases of local producers as a way to bring in new customers and loyal fans alike.

Lucy said retailers should play to their strengths in this challenging environment. “Retail is a diverse industry; each retail and leisure subsector faces its own unique challenges, but also, importantly, has its own unique strengths.”

As fine food retailers know, location is important. Lucy highlighted the innovation of businesses in retail parks, particularly. “Retail parks have shown us excellent examples of agile strategy in action, splitting larger units into smaller ones or converting space for alternative uses to successfully revitalise vacant stock. The current climate is undeniably difficult, but it should not be overlooked that today’s retailers are more innovative and future-thinking than ever.”

Calls for action to boost retail sector

To “inject more vibrancy into high streets and town centres, and prevent further store closures,” Helen Dickinson, the chief executive of the BRC, called on the government to review the business rates system.

“Currently, there’s an additional £400m going on retailers’ bills next April, which will put a brake on the vital investment that our towns and cities so desperately need. The government announcement earlier in the week about making changes of use to vacant units easier is welcome, but it’s important local councils have a cohesive plan, and don’t leave gap-toothed high streets that are no longer a customer destination and risk becoming inviable. Government should go one step further and freeze rates bills next year,” she said.

The news of rising vacancies comes as confidence among small businesses fell after a strong recovery at the start of the year, according to the UK Small Business Index from the Federation of Small Business (FSB). 

Two in five small businesses said their revenues fell over the second quarter, while one in three saw an increase. Most SMEs cited rising costs as an issue, while almost half said an increase in labour costs was causing problems. The number of businesses concerned about utility and fuel costs fell, however, to 25%.

Martin McTague, the FSB’s national chair, said that despite the downturn, “the future is looking rosier” for small businesses. “Given the right conditions for growth, small firms have the potential to power a groundswell of economic activity,” he said.