Store Openings and Closures 2023

What do mixed results mean for the sector?

In 2022, we saw net closures drop to their lowest rate since 2017 and openings improve. This year, while openings continue on a positive trend, an increase in closures sees overall results looking more mixed.

A total of 14,081 shops and outlets belonging to multiples and chains (those with five or more outlets) exited UK high streets, shopping centres and retail parks in 2023. Equivalent to 39 closures per day, it’s a slight increase compared with last year although less than 2016-21. It’s also a slight increase in net closures (equivalent to 14 a day), but remains better than 2018-21.

Encouragingly, openings are up for the fourth year in a row. But the moderate increase (to 25 per day) is not enough to offset the greater number of closures.

To understand what these mixed results mean for the sector, this year we have also looked at the long-term performance of our Store Openings and Closures findings, which have revealed some interesting things over the past eight years.

Performance driven by location more than region

Last year, we saw regional variations all but disappear, and retail sales stabilise. We also noted that things have generally levelled up across Britain, with outlying results more a combination of the phasing around its reopening post pandemic, as well as different levels of financial support at the time.

This time round, we’ve seen something similar again. Although this year’s results show higher absolute numbers of net closures in London and other urban areas when compared to other regions, there is little variation in the percentage of chain closures across different GB regions over the last decade as a whole. This year’s stabilisation corrected a longer-term trend of bigger variance and disparity across regions, originally caused by a shift towards cities pre-pandemic, which then reversed during the pandemic as a result of new consumer behaviours such as the working from home trend. Looking at the long run decline since 2015, every region of the country is within 2 percentage points of the national average.

It’s apparent that catchment and outlet type is more important than region for success.

Retail parks returned to growth in 2023, significantly outperforming other locations and continuing the positive performance we explored in our H1 findings. What appears on the face to be a post-COVID trend - with shoppers embracing transport links, parking and greater convenience - our long-term data shows that this outperformance actually predates the pandemic, with exactly the same number of chain retail park outlets in 2019 as in 2015, while other location types saw between a 9% and 12% decline in outlet numbers.

Chain outlet net change at retail parks continued to be lower than than GB average from 2020 onwards. Even though the pandemic affected retail parks, the impact was still lower than any other location type. Contrast that with the high street, which had already seen a double-digit decline in stores in the years prior to the pandemic, and it indicates that today’s consumers have long held a preference for the convenience of retail parks.

Category success for leisure with declines more structural or specific

Leisure dominates growth categories once more this year, and has broadly done so post-pandemic through a rapid bounceback in openings.

Many of the fastest growing categories are being driven by openings in out-of-town and retail parks. In H1 we saw a big recovery in food-to-go, supermarkets and coffee shops, all benefiting out of town locations such as drive-throughs, motorway service areas, inside supermarkets and petrol forecourts, as well as on retail parks.

These recent results highlight a long-term trend of consumers looking to prioritise experiences over physical retail, with hospitality now accounting for 5 of the top 7 categories. Takeaways and cafes have been boosted by franchises - ranging from pizza delivery to fried chicken and even bubble tea - which are agile, and able to open and expand rapidly. Other categories are being driven by specific sector trends. While petrol stations in general are in decline, for example, their numbers have been boosted by the rapid roll out of EV charging points, while supermarket openings are still being driven by discounters.

The success for hospitality comes in the face of significant coverage about difficult trading conditions, failures and general struggles. However, these results suggest that hospitality chains are generally performing better and it is independents where the challenges are being felt most, pinched by increased energy and other costs, the phasing out of pandemic government assistance, and the impact of COVID loans tied to interest rates.

When it comes to declining categories, the fastest this year have mostly been those affected by the large-scale restructurings and administrations of one or more major players within those categories. Some of these results are likely to be a one off - pubs, card shops and variety retailers, for instance, were not in the bottom 20 fastest-declining categories last year. Other closure sites may also have been taken over by independent operators - e.g. chemists or pubs, where two of the largest chain operators announced they would exit many of their outlets as part of restructuring during 2023 - so it is unlikely these results will recur in 2024.

In contrast to the categories affected by one-off restructuring, banks and betting shops continue to be affected by long-term structural decline and a shift online. While we have seen this trend for a number of reports now, the closure rate is beginning to slow in both of these categories, so the worst of the declines may be over.

Long-term closures a result of services rather than retail

In our H1 report, we noted that even retail park success was unable to mask the slow and steady net decline in chain outlets over the last five years. But despite the focus on retail, store closures have actually been driven by services when we look over the past decade.

While services and ‘comparison retail’ (i.e. categories such as fashion, home and electricals) have shown similar levels of decline since 2015, both worse than the GB average, comparison retail chain store closures almost exactly mirror the decline of in-store and the rise of online retail sales. While in-store sales understandably declined considerably throughout the pandemic - as a result of enforced closures, lockdowns and distancing, among other factors - we saw in-store non-grocery retail bounce back and then revert to the long-term trend after the pandemic.

Looking over the long-run period, this change in comparison retail outlets is what we would expect, with a c.3% year-on-year decline in store numbers almost perfectly matching a c.3% per annum decline in penetration of in-store sales. Together with the trend of a slower decline in grocery and convenience retail outlets, this adds up to a 2% decline in overall retail outlets over the past decade.

What does another mixed bag of results mean for consumer-facing businesses?

While the headline results show an acceleration in store closures and is net negative overall, much of this is due to a number of high-profile and large-scale restructurings or administrations. There is optimism that these results are a one-off, and that we’re unlikely to see a repeat of all the same poor-performing categories in 2024. Even those categories in long-term structural decline, such as banks and betting shops, are seeing closure rates slow.

However, our long-run analysis does show the 2% decline in chain outlets is in-line with the wider trend of more shopping and services moving online, and that's in spite of the preference of many younger consumers to shop in store, which we found in our Consumer Reconsidered report. We would expect to see this continue at least in the medium-term, given the steady consumer embrace of online. And it’s a decline that we’re seeing nationwide - while there are some regional fluctuations year-on-year, we’ve seen little variation over the last decade.

After a few false dawns, these results confirm the pandemic shake out is now over, with regions and categories now where we expect them to be. This is also reflected in openings almost entirely driven by hospitality - a sharp bounceback after pandemic declines. While good news for chains, independents have fared much worse, due to higher costs, reduced government help and the need to repay COVID loans tied to interest rates.

And this news should be tempered by the fact that this success is mostly for retail parks or out-of-town locations, areas that outperformed well before the pandemic. That creates a pressing need for landlords, local governments, operators and other stakeholders to understand why consumers prefer retail parks and drive-thrus, and work together to revitalise or reposition high streets and other locations.

Ultimately, rather than highlighting immediate and urgent problems in the sector, our 2023 numbers are a result of fluctuations driven by one-off events. While the results suggest there are areas that need some intervention, we expect 2024 to be better overall, as closures revert to trend and the macro environment improves, but with the underlying long-term trend of online continuing to pull consumers from in-store locations.