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.