Sports Direct CEO proposes online retail tax to save the High Street

Mike Ashley, the billionaire founder of UK retail company Sports Direct, wants to tax retailers into keeping bricks-and-mortar stores open.

Speaking to the Housing and Local Government Committee in parliament on Monday, Ashley said the “internet is killing the High Street”, and the only way to save it is through collective action from landlords and government bodies.

“I want to make it crystal clear: the mainstream High Street as we think about it today – not the Oxford Streets and the Westfields – are already dead. They can’t survive,” the BBC reported Ashley as saying.

“We have to realise the High Street won’t make 2030 – it’s not going to be there unless you do something really radical and grab the bulls by the horns. It won’t be there.”

Ashley’s solution is to tax all retailers that make more than 20 per cent of their revenues online, a proposal that he noted would impact Sports Direct’s own £400 million ($693 million) online business.

This, he thinks, would incentivise retailers to keep bricks-and-mortar stores open, while the funds could be used to help local authorities offer rate cuts to businesses that promise to refurbish local high-street stores.

Shrinking out of existence

Ashley’s proposal has been met with raised eyebrows by those who believe retailers simply need to adapt to the new reality of online shopping.

“There are always those who will blame [falling sales] on greedy landlords or online retailers…but ultimately, innovation not domination will make your business thrive,” Paul Greenberg, founder of the National Online Retailers Association told IR.

To be fair, Ashley is correct that bricks-and-mortar retail is disappearing in the UK. An analysis of the number and value of retail properties across England and Wales by Northumbria University found that total retail floorspace shrank from more than 157 million square metres in 2008 to just under 114 million square metres in 2015, representing a reduction of 27.6 per cent.

But his statement that “it is not my fault the high street is dying; it’s not House of Fraser, not Marks & Spencer or Debenhams’ fault…it is the internet that is killing the high street” seems overly simplistic at best, and just plain wrong, at worst.

“People like Mike Ashley, think we have no overheads. I would like to invite him down to our headquarters and distribution centre and see what we have built out of a $10 a day budget with no external investment since 2004,” Tony Nash, founder and CEO of Booktopia, told IR, referencing the commonly held belief that e-commerce companies have lower operating costs than bricks-and-mortars, and therefore are able to undercut them on price.

“We have 13,000sqm, $10 million of automation, we employ over 200 people, we have built our own website, our own warehouse management system, other internal systems, algorithms…we have donated over $750,000 in cash and books to literacy based projects in Australia,” Nash said.

“Now that’s a travesty”

But even if it were true that online retailers were killing the High Street, Ashley’s proposal to tax retailers into keeping bricks-and-mortar stores open wouldn’t work, according to Nash, because customers no longer want to shop that way.

“The key to Mike’s dilemma is more about focusing on what the customers want. Not about taxing others. The high street or any shopping precinct for that matter needs to give shoppers the best experience you can get,” he said.

“I have been to high street shops and the shop assistants are sitting there behind the counter on their phones. I walked around without being attended to. Now that’s a travesty.”

Greenberg is also sceptical of Ashley’s plan, which he described as a “last gasp plea to punish the advantaged”.

“Customers will hate it. It’s out of step with the way the rest of the world is moving,” he said.

Ashley’s Sports Direct acquired ailing British department store House of Fraser earlier this year, making promises to save 80 per cent of the retailer’s 59 stores from closure.

At the hearing on Monday, he said it would be a “god-like performance” if he managed to do so and would probably require a 50 per cent reduction in rents across the company.

Comments

1 comment

  1. Karen posted on December 5, 2018

    Why are landlords hiking up the rent so much? Are they under pressure or is it greed? Something else? We should start by looking at the actual problem bricks and mortar stores are experiencing, not blame online which seems backwards to where retail is also moving - I think we need both options - physical stores and online, especially for startups and solo designers. reply

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