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Today’s announcement that House of Fraser has been acquired by Sports Direct, having been forced to call in the Administor, is the latest blow to the UK highstreet.

This year alone has seen nearly 22,000 jobs lost from highstreet stores, and with the potential for half of House of Fraser’s stores still to close, this figure looks set to rise further.

Amazon continue to thrive as UK retailers struggle to survive

In comparison, Amazon’s fortunes continue to grow.  Their domination of the market place appears to be going unchallenged in the face of other retailers’ demise.

 

Why should the UK public be concerned?

Currently only 18% of UK retail sales are online, although this figure has been steadily growing over recent years.  However, given that 82% of sales still occur on the highstreet, why are stores struggling to survive?  This drop in sales alongside tightening margins has been enough to see some large names disappear from our highstreets.

In a digital age the shift to online shopping is not surprising but is it what the public wants and does the convenience it offers come at too high a price?

 

Highstreet still preferred to on-line shopping

It seems that the public may like the ease of on-line shopping but are not ready to see the end of highstreet stores just yet. Our recent survey found that if given the choice of only shopping online or on the highstreet, 82% of respondents opted to shop in stores. 

 

The Amazon Trap

Of course Amazon’s ability to undercut store prices is one of they key reasons for their success. But how are they achieving this?  By keeping their costs to the minimum at every stage their profits have soared, with Amazon’s owner, Jeff Bezos now alleged to be worth £118 billion.  This equates to hourly earnings of almost £2.5m per hour since he started Amazon. Bezos summed up his approach by saying “There are two kinds of companies, those that work to try to charge more and those that work to charge less. We will be the second.”  Clearly he has succeed in his aim by finding ways to avoid taxes and paying front line workers at the bare minimum, whilst expecting them to work in highly challenging conditions.

 

Is it time for the tide to turn?

Despite the obvious appeal of Amazon’s offering to customers, 63% of respondents to our survey confirmed that they would stop buying from Amazon if it helped to save the highstreet. Therefore are people starting to see the wider picture and appreciate the negative impact that Amazon has on the UK economy as a whole?

Job losses in the sector won’t be replaced by new roles within Amazon, who are clearly focused on introducing robot and drone technology to further reduce their cost base.  Similarly, Amazons’ ability to pay around 20 times less tax than other similar size companies means that further input into the UK economy is lost.  Last year they paid just £4.5m in tax against UK pre-tax profits of £72m for Amazon Services UK.  By reporting revenue from its UK retail sales through a separate company in Luxembourg, the total level of their tax paid in the UK remains unclear.

 

How can Amazon’s drain on the UK economy be stopped?

What is clear is that whilst our highstreet stores push money back into the economy through staff wages and tax, Amazon is focused on minimising the input back into the UK.  Of course everyone has a choice where they spend their money and online shopping has many advantages.  However by opting for online options linked to highstreet stores, the income generated will find its way back into the economy.

Whilst the UK economy struggles to generate the growth needed to fund our public services, Amazon’s ability to avoid tax comes at a clear cost to the UK public.  What is needed is a radical review of the current tax and business rates systems to level the playing field.  Only then will Amazon start to  contribute to the economy at a level appropriate to the profits they are making from the UK public.

 

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