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Growing Pains or Death Rattle? British High Streets Falter

When it’s deliver-or-die, supply chains become the lifeblood of a company. To that end, the fashion industry has embraced technology to navigate today’s hyper-complicated supply chain, with myriad solutions shaping the first, middle and last mile. Call it Sourcing 2.0.

The Centre for Retail Research now says that the UK’s “high street crisis” will only escalate in the next five years. The latest statistics indicate that the number of retail stores in Britain will drop by more than 20%, and by 2018, researchers predict that 60,000 more stores will have been shuttered.

While commentators have frequently blamed the usual suspects–the failing economy, the rising popularity of e-commerce, and easy-to-hate supermarket chains–analysts are now pointing to the rising cost of rent, and rising business taxes, as the traditional retailer’s cause of death.

When it comes the mega-chains, it’s clear that many have been affected by Britain’s diminishing shopping centers. Marks & Spencer, for example, has announced that after 2016, it will build no more physical stores in the UK, and Tesco has halted plans to build over 100 mammoth “hypermarkets.” Both retail giants say they are shifting their new growth to the internet.

E-commerce is certainly a factor in traditional retail’s struggle. UK shoppers are already more likely to shop online than French or German shoppers, and while today, only 12.7% of sales are made online, analysts predicts that by 2018, 20% of all sales will be made via e-commerce.

But according to James Hall of The Telegraph, retailers report that “the biggest single reason” for shop closures is the “financial demands from government, in the form of business taxes, and from landlords, in the form of rent.”

Ed McGarry, owner of soon-to-be-shuttered Clapham Books, told Hall that most people assume he’s been losing too much business to Amazon and other e-book vendors. But his problem wasn’t the competition, he explained–it was his landlord’s most recent rent increase proposal, which meant his rent will quadruple in the next fifteen years.

The British Retail Consortium reports that the costs of running a retail shop have risen by 21% since 2006, but sales have increased only 12%. Contrary to McGarry’s anecdote, the British Property Federation states that business rents have either remained static, but business taxes rose 2.8% in 2012, meaning that the government collected an extra £175 million, or $268 million, from shops.

Still, Professor Joshua Bamfield, the author of the Centre for Retail Research report, told Financial Times that “Retail stores will remain an important, although smaller, part of the shopping process as online retail continues to grow.”

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