Tuesday, 24 December 2019

"More High Street/Business rates fun"

Emailed in by Lola from The Telegraph:

Harrods’ Knightsbridge store alone will pay £17.1m this year in business rates, according to property consultant Altus Group. Retailers large and small claim the property tax is deeply unfair because it hits high street stores far harder than online players such as Amazon, which rely on cheap out-of-town warehouses.

“There isn’t a level playing field and nobody’s tried to put in place a level playing field,” Ward says, “Until there is a fundamental review of the business rates system, then I think that the high street is really doomed.”

According to this, Harrods has an annual turnover of £2 billion, most of that will be from its flagship store in Knightsbridge, so they are paying less than 2% of their turnover in Business Rates.

Does he not realise that there is a perfectly level playing field? If he thinks he can make more profit by shutting down the flagship store and just selling stuff online from an out-of-town warehouse, then why doesn't he do it?

He doesn't do it because he knows perfectly well that the £17.1 million a year they pay is only a fraction of the extra profit they can make by trading from a huge building in the swankiest area of London, surrounded by obscenely wealthy people and tourists who have nothing better to do that go to Harrods and spend money.


Dinero said...

3 ways to look at this. BR burden falls on the landlord and so the Tennant is not concerned or The BR burden is on the tenant and is a service charge for fixing the pavement etc and so the level playing field argument goes away. Or the one that Ward presents, the burden is on the the tenant, the service charge concept is ignored and he has a non level playing field.

Tim Almond said...

If Amazon can ever replicate what Harrods does, Harrods will have a lot more than business rates to worry about.

Harrods mostly sells stuff like clothes, jewellery, beauty, home stuff where you have to be physically near the thing. It mostly locks out online sales. But everyone is working on doing this because it's so much more efficient selling things through warehouses. We even know this from the pre-internet era with the likes of World Books.

Mark Wadsworth said...

Din, yes, you have to have a pretty warped world view to believe there is no level playing field.

TS, I would argue that Harrods are selling an 'experience', the fact they have such a lovely big old building in a super-posh area is their Unique Selling Proposition. There is precisely zero competition from online warehouses selling used car parts or budget fashion.

Robin Smith said...

The sudden concern for the small business is a curious thing, usually by wealthy planet savers, bidding for a license.

Stiggler, that is bollox. Have you ever traded long term on the high street? People now get multiple items shipped to window shop at home. Wadsworth is right

Tim Almond said...

Robin Smith,

I'm not saying it isn't happening, but look at what shops are still on the high street and it's fashion retail, mostly. Bookshops, record shops, travel agents have all gone into decline. I still mostly buy my shoes going into a shop, but I can't remember the last time I bought a DVD in a shop.

Robin Smith said...

Card shops do the best(except charity, food stops, coffee etc)

Clothing/shoes are terrible because we order multiples by post now or go to the mall.

Waterstones bizarrely is making a come back

Am speaking from primary evidence in the trade.

Stunned at the ignorance of traders around business rates. Fuck em.

Bayard said...

I still think that the "Screwfix/Argos" model is the way to go for small retailers: put all your wares on line so that customers can shop from the comfort of their own home, do price comparisons etc, then have a physical shop where they can come and buy the goods that same day, instead of having to wait for them to arrive and be the wrong size/colour/style etc.

Robin Smith said...

@Bayard, yes I like that too. But the retailer and the collection point are no longer the same entity now?

Tim Almond said...

Robin Smith,

"Waterstones bizarrely is making a come back"

Waterstones did a couple of smart things: more autonomy for store managers, so they could customise their offering to the local market, and more emphasis on service. I know people who shop there because you can pop in and say what sort of books you like and get recommendations.


I'm now wondering if you could do that with shoes. Like get a warehouse out of town, and have a small front desk with robotic cranes collecting the shoes for people to try on.

Robin Smith said...

Partner has been running shoe shops for more than 10 years. People are online buying several pairs and styles at a time and sending old ones back. Such is the life of the slave today.

George Carty said...

Isn't the main asset of Amazon and other famous online megacorporations (comparable to the location value of Harrods' Knightsbridge flagship store) their very fame (that makes them obvious ports of call for most online shoppers), while small independent online retailers have to pay rent to one or more of the megacorporations in order to trade, either by selling through the Amazon Marketplace or by spending a lot of money advertising with Google and/or Facebook in order to become well-known?

Mark Wadsworth said...

GC, yes exactly. It's called network effect and is not entirely dissimilar to land ownership (Amazon own the virtual land in the middle where all paths cross).