The Shape of Retail

This report by Alvarez & Marsal finds that store-based profit margins have more than halved over the last decade, driven by increasing operating costs and the legacy of inflexible lease structures. This has put a strain on large, multiple retailers that occupy up to 20 percent more store space than they need and can financially justify.

Key points include:

• Despite the rapid growth of online retailing, even on its current trajectory, physical retail will still account for 65 percent of all sales over the next five years.
• In the past decade, the value of online retail has risen four-fold, being worth an estimated £70.3 billion in 2018 and accounting for just under £1 in every £5 spent.
• Operating costs rose by 2.4 percent in 2018. However, over the last five years, they have risen by 10.8 percent, with labour costs making up over half of the increase.