They called 2017 the year of the Great Retail Apocalypse. Although in Britain, the 2018 sequel looks set to be even more frightening.
Across the U.K., the high street is crumbling before our eyes. House of Fraser was on the brink of closure this summer–and if it hadn’t been saved by a last-minute buy-out, 17,000 jobs across their high street operation and logistics services would have been lost. In August, New Look also announced they were looking to restructure and close shops, with a loss of 900 jobs. Marks & Spencer is scaling back their regional stores and cutting staff, as is Debenhams, while John Lewis is undergoing the biggest facelift in its history.
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Much like the U.S. and Asia, e-commerce is the proverbial Big Bad Wolf coming to destroy our brick-and-mortar shops. And it looks as if legislation may be the only way to ensure online brands don’t drown out the rest of the market. In the U.S., a Supreme Court ruling has allowed states to force e-commerce companies to pay sales tax, just like any local retailer. This will go some way to leveling the playing field and ending the arbitrary advantage online retailers have over their store-front competitors.
The U.K. has been crying out for a similar piece of legislation. As the country’s most famous—and most-loved—retailers start failing one by one, regional high streets are looking increasingly bleak. Labels also need a high-street presence, as it isn’t easy to personalize a brand online. An increasing number of companies are opening shops not to sell things—the internet does that pretty well—but to advertise their ethos and entertain. But they need help in order to stay afloat.
It seems the British government has finally cottoned on to the problems the high street is facing. Earlier this month, the Chancellor Philip Hammond suggested an “Amazon tax” to put online and high street retailers on more even footing. Speaking to the Sky News television network, Hammond said the government was seriously considering a designated tax for online marketplaces, such as Amazon and eBay, based on the “value generated” by the platforms. However, given that many of these major e-commerce ventures are U.S.-based, it is far from easy for the U.K. government to unilaterally decide this.
“We want to ensure that taxation is fair between businesses doing business the traditional way and those doing business online,” Hammond said. “That requires us to renegotiate international tax treaties because many of the big online businesses are international companies. If we can’t get international agreement to do this, we may have to look at temporary tax measures to rebalance the playing field until we can get international agreements.”
Some commentators have suggested that the government should use the taxes generated from an eventual charge on e-commerce sites to help prop up struggling high street brands such as Marks & Spencer. However, this option is a potential minefield.
“The government has a key role to play in terms of ensuring a level playing field in terms of taxation but subsidizing one channel with another doesn’t make sense,” said Rhiannon Thomas, a senior analyst at AT Kearny in London. “We are operating more and more in omnichannel environment and the boundaries between physical and online are blurring both within and across companies, taxing one to subsidize the other is not a sustainable answer. Retail industry associations can play a key role here in ensuring that UK companies with physical retail are learning from each other in terms of best practices and learnings from others’ mistakes especially between non-competing companies.”
The government’s role in protecting the high street is arguably a subtler one than providing tax breaks and interest-free loans.
“The notion that you can ‘protect a high street’ is inherently flawed,” said Tamara Cincik the founder of London-based fashion lobbying group, Fashion Roundtable. “What Amazon and online sales have done is completely changed the consumer experience, and with it, the demand component of the market.
The role the government should play is to provide accessible, frequent and cheap public transport, clean infrastructure and safe towns—this will tempt people to leave their laptops and make the journey to the city centre,” she continued. “But most importantly, it will go a long way to supporting the re-growth of the high street.”
