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Debenhams closures show Government needs to address tax advantages for online retailers: expert comment

Christian Stadler, professor of strategic management at Warwick Business School, said:

"Debenhams is the latest in a long line of department stores to run into trouble as the decline of the High Street continues, with more and more shoppers choosing to buy online.

"For a long time clothes retailers were shielded from online competition like Amazon because shoppers liked to try on outfits before they bought.

"Now online shopping is so convenient, and clothes are so easy to return, that protection no longer exists.

"Small boutiques will continue to attract shoppers because they offer a more exclusive experience, but larger chains are being squeezed out of the market.

"The tax advantages that online businesses enjoy have to be addressed, otherwise iconic names like Debenhams will continue to face higher costs than their internet rivals and will struggle to compete.

"The Government has to decide whether it is prepared to stand by and watch the death of the High Street and the loss of jobs that involves. Politicians need to think about what city centres will look like, and what the environment will be like, if all the shops are gone and decide whether they want to give stores a leg up.

"Debenhams closing up to 50 stores is worrying news, but fortunately it is not as dramatic as US department store Sears going bankrupt. There are still things management can do.

"Online sales have grown by 10 per cent, so management need to invest heavily in that.

"It has also tried to make shopping more of an experience by opening champagne bars in some stores. Similar tactics have helped other department stores, but it slows the decline, rather than stopping it.

"Debenhams needs to optimise the opportunity to renegotiate its expensive long term leases when they expire to save money and inevitably it will close some stores.

"We don't want Debenhams to go the same way as Sears, where hedge-fund managers took over, selected the more profitable areas of the business, such as property, and allowed the others to fail. For the good of Debenhams and High Street shoppers we don't want that to happen."

25 October 2018

  • Christian Stadler is professor of strategic management at Warwick Business School and is the author of Enduring Success, revealing how the world's top performing companies have consistently beaten their competitors for more than 100 years.

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Warwick Business School

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