Understanding the impact of department store closures on the high street within a Covid landscape

Following a year where retail continued to be heavily impacted by the pandemic, stores and destinations are now turning their attention to the future, and how they can maximise performance within a Covid landscape. Understandably some of the themes and issues, historically at the forefront of the narrative around retail and retail destinations, are re-emerging.  A key issue prior to the pandemic was the impact on the high street of the contraction of the department store, with 2021 alone seeing the demise of Debenhams and House of Fraser and the contraction of the John Lewis store portfolio, all of which followed on the heels of the collapse of BHS in 2016.

However, measuring the impact on a particular town centre of the closure of a key retailer such as Debenhams or John Lewis is far more complex against the backdrop of such a fundamental shock to the retail landscape as experienced during the pandemic. With footfall lower in 2021 than in 2019 across all town centres, a comparison based on year-on-year change – the standard metric for performance evaluation – is simply not sufficiently meaningful. Instead, we need to turn to a comparison of the performance of a town against its peers, and with this in mind we have examined the performance of towns where a Debenhams store closed, versus the relevant regional benchmark for high streets over the period from May (when stores closed) to December 2021.

Using this comparison, MRI OnLocation footfall data reveals that the adverse impact of the store closure is certainly not comprehensive; in just over half of all locations in which a Debenhams store closed the drop in footfall between May and December 2021 versus the same nine months in 2019 was more severe than across the region as a whole. What is also evident is that there was an acceleration in the impact, with a greater number of towns experiencing a drop in footfall from August onwards, rather than in the three months between May and July.

In addition to the acceleration in impact over time, the degree of impact on footfall of the closure varied from town to town; across all towns the decline in footfall was -5% more severe than in their respective regions, however there was a significant variance from town to town, ranging from just 0.1% below the regional average to as much as 14% below.  In over half of all towns impacted by the closure of a Debenhams store, the drop in footfall was up to 5% more severe than across the region, and more than 10% severe in just over 1 in 10 towns.

Decline in footfall in towns impacted by closure of a Debenhams store versus across their regions – May to Dec 2021 vs 2019

At first sight this data appears counter intuitive, as the commonly held view is that the closure of a major anchor store in a town severely impacts footfall following the store shutting their doors for the final time. However attention needs to be paid to the rationale behind store closures, which is generally poor trading performance of a store over the long term.  In itself this indicates that the number of customers attracted into the store would have been declining pre-closure – which would undoubtedly have been exacerbated by the operator winding the store down in advance of its closure and not investing.  The inevitability of this is that the most significant degree of impact on the town’s footfall would have occurred even whilst the store was continuing to trade, albeit over an extended period of time, with just the tail end of this impact felt once the store finally shut its doors and ceased trade completely.

This data delivers the strongest evidence for the necessity of ongoing monitoring of town centre performance – before store closures actually occur.  Tracking customer demand provides the most robust data available to indicate the magnitude of and trend in any deterioration in trading, and footfall is the most relevant indicator of consumer demand.  Shoppers respond with their feet, shifting their custom elsewhere when a retail destination and the stores with it do not meet their requirements, and as that response is penalty free with no required notice period, it can happen almost instantaneously.  Footfall data is gathered continuously, come rain or shine, 24/7, capturing the ebbs and flows of consumer demand – there are no delays in reporting that are endemic to other metrics such as retailers’ trading results (only reported each quarter and at a national level) and vacancy rates (kept artificially high due to the penalties often faced by retailers in vacating their premises).

The characteristics of continuity and immediacy that are embedded in the DNA of footfall are key here, as in combining these two characteristics mean that retailers and destination managers can identify the critical early warning signs that are needed for them to anticipate and ameliorate the adverse consequence of the failure of key retail stores through local and timely interventions.

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