Could We See the End of the High Street Betting Shop?

William Hill, high street bookmaker
Tupungato / Bigstockphoto.com

“The death of the British high street” is a phrase used increasingly often among national news outlets. In recent years, there have been a growing number of businesses running into financial trouble or forced to close for good. Largely, this is a consequence of the growth of online shopping but other factors like rising costs and poor infrastructure are also to blame. Despite the precarious position many high street shops find themselves in today, many still believe they can overcome the challenges faced.

So far, we have spoken about high street shops in a general sense but what we are particularly interested is betting outlets. Many who oppose gambling have objected to the large numbers of betting shops on the average British high street. However, will those people still feel the same way when retail units are simply left empty? A bookmaker may not have the same appeal as an artisan bakers or a boutique clothes shop; but such are the travails of the modern high street, if the bookies disappeared then more than likely shops would simply fall empty. That means no rent for property owners, no tax for the council and governments and no jobs for the local people.

Will bookies continue to have a presence in our town centres or is it only a matter of time before they take all their business online? For those of you that regularly visit your local bookie to place your bets, the thought of them disappearing for good is perhaps a troubling one. While it is impossible to know for sure what the future holds, by examining current trends and data, we can make an informed prediction of what lies ahead for betting shops.

Fixed-Odds Betting Terminal Changes

Fixed Odds Betting TerminalWhile we often talk about high street shops as a homogenous group, different industries face their own specific challenges. The growth of Amazon for instance posed a far bigger threat for bookstores than it did for your local greengrocer (for now at least, although Amazon has designs on just about all areas of retail!).

Sometimes the danger comes from competition but, in other instances, it can come from government legislation as bookies found out. In 2019, the UK government opted to slash the maximum betting limit on fixed-odds betting terminals (FOBT) from £100 right down to £2. This was a particularly significant change not just from a responsible gambling perspective but also because FOBTs were responsible for £1.7bn of high street bookmakers’ £3.2bn annual revenue – a huge proportion.

Although culture secretary Jeremy Wright praised the move as a “significant step forward in protecting vulnerable people”, it threatened to be a major challenge for bookies across the nation. One report published in 2018, commissioned by the Association of British Bookmakers, predicted that the change to FOBTs would lead to the closure of 4,500 betting shops (approximately 50%). It is worth mentioning though this this report, written by accountancy firm KPMG, was accused by many as exaggerating the dangers. Even Paddy Power declared that although a £2 stake limit would have “some impact” on betting shops, it was “far less severe” than the AAB depicted. Their view was echoed by Matt Zarb-Cousin, speaking on behalf of the campaign group Fairer Gambling.

As groups argued over the precise impact the proposed FOBTs regulation would have, there was no denying they would harm betting shops to some extent. After all, FOBTs had long been something of a cash cow for many high street bookies. The new rule came into full effect on 1st April 2019 and, a month later, machine revenues had dropped around 40%. The main issue was, and still is for bookmakers, that punters were spending less money overall rather than simply spending it elsewhere in the shop.

Some bookies noted there was virtually no increase in over-the-counter bets while others only reported a very modest increase of around 10%. Over a year later, in October 2020, GVC (Ladbrokes & Coral) noted that machine revenue was down 36% while betting revenue had increased just 7%.

Given that prior to the rule change, FOBTs accounted for 57% of betting shop profits, up from 38% in 2008/09, this meant a lot of lost revenue. Paddy Power estimated that its annual losses would range from £36m and £47m as a direct result of the government’s actions. Despite this, the Irish bookmaker stayed largely defiant stating they were not expecting to have to close any of their stores. They were completely alone in this view though with all of their competitors distinctly more gloomy in their predictions. Ultimately, for many individual shops, the new FOBT regulation made the difference between running at a profit and running at a loss.

Start of a Decline

Shop closed due to Covid-19

After reading the section above, it should come as no surprise that many high street betting shops were forced to close, primarily because of the new FOTB legislation. In October 2020, an exclusive article published by The Mirror revealed that 460 high street bookies had shut since the end of the previous year. This represented a 12.2% reduction in the number of high street shops.

Across all locations, including those away from the high street, the reduction stood at 11.3%. While substantial figures, this is far lower than many had predicted. Indeed, GVC (owners of Ladbrokes and Coral) only ended up shutting half the stores they had anticipated by March 2020.

The Coronavirus Challenge

Changes to FOBTs have undoubtedly been the driving force behind high street betting shop closures. Even before the coronavirus pandemic brought the nation to a standstill, many shops had already closed or were on the brink of doing so. Still, it would be inaccurate to think that the challenges of Covid-19 had no impact on the industry. In the short term, profits slumped as sporting events ceased to run and the long-term impact is even more high street betting shops may close.

In August 2020, William Hill made the decision not to reopen 119 high street stores that were temporarily closed due to the coronavirus lockdown. When announcing the move, they stated that they anticipated “that longer term retail footfall will not return to pre-COVID levels”. Although William Hill were alone in making such a decision, their prediction regarding footfall may potentially not be misplaced. Many gamblers who were forced to take their business online when all their local shops shut, may not return to former habits.

As with other sectors, the situation brought about by the pandemic may serve to hasten the move towards online. Customers that had never tried betting online may have discovered its convenience. In addition, fans of FOBTs will have found that whilst stakes in shops are just £2, online, for now at least, they can wager far more and also choose from a much wider selection of games.

Punters Increasing Betting Online

With lockdown meaning there was no possibility of betting in-store at their high street shop, the obvious alternative was betting online. Due to the lack of sporting events, this often meant betting on games such as virtual sports, or on casino games like roulette or slots, rather than actual sports.

For those that made the switch, they joined the continually growing number of people who choose to bet in this way. Figures from the UK Gambling Commission 2019/20 Annual Report are something that helps highlight this recent trend:

UK Gambling Commission Figures

While in-person gambling has stayed steady in terms of gross gambling yield, it continues to shrink as a proportion of the total revenues. Online gambling, on the other hand, continues to eat a bigger share of the market, albeit more gradually than one might expect. In total, the Gambling Commission estimated that 11m now people bet online, from a total pool of 24.7m UK bettors.

Mobile Betting

Interestingly, this rise has been driven by mobile gambling rather than bets on PCs or laptops. Gambling Commission data found that between 2015 and 2019, there was a 25% drop in the number of players who had placed a bet on their PC/Laptop in the past four weeks. The figure for smartphones in this period however jumped from 23% to 50%.

Clearly, the biggest rival to high street betting shops now are mobile apps. Every major bookmaker these days offers both an Android and iOS app with offers regularly sent as notifications to maximise engagement. This direct advertising in combination with features such as in-play betting can really work wonders in getting people to have a flutter. After all, according to data collected in 2020, 84% of adults owned a smartphone, spending an average of 2 hours and 34 minutes using it every day.

The push towards in-play betting is another reason why betting shops are missing out. Many punters love the ability to make bets during a game, match or race. Mobiles are perfect for this but in-play betting is not something that is possible in a high street betting shop, at least not in the traditional way.

Signs of Hope?

Clearly, the combination of changing shopping habits, the reduced profitability of FOTBs and the ongoing uncertainty due to Covid means that high street betting shops are not thriving. They remain far from extinct though so it is worth asking if there is still hope for them, or is their slow death a mere inevitability?

As things stand, we are far more inclined to pick the former rather than the latter. Sure, betting shops might not bring in as much money as they did in their prime but some will still attract enough punters long term to make them viable. Some bookmakers might also even consider running a store at a loss due to the importance of increasing brand awareness and adding to the legitimacy and authenticity of the group. Brand recognition and an interest in multichannel marketing are reasons why Deloitte believe betting shops will continue to survive in significant numbers.

There are other arguments supporting the view that high street betting shops will not disappear any time soon. One persuasive opinion, as expressed by Susannah Streeter from Hargreaves Lansdown, is that an appetite to go to betting shops will persist due to the social aspect of it.

imageHOLDERS, who produce gambling kiosks, agreed with this point stating that online chat rooms on betting sites cannot replace in-person social interactions. They also spotted another crucial advantage in that in-shop bookmakers, unlike online outlets, happily accept cash bets. While society may be becoming more and more cashless (another trend hastened due to recent events), there are still a significant number of people who prefer to have notes and coins in their hand. What is more, few can argue that receiving winnings in cold, hard cash beats seeing it paid into your online account.

Indeed, even in 2020, cash payments still represented 23% of all payments, or £9.3bn in real money terms. Even if the percentage share continues to shrink, which it surely will, we are still talking about billions being exchanged in cash each year. It would be wrong to think that some punters’ preference for cash is simply due to them refusing to keep up with technology.

Some people prefer cash because it prevents them spending more than they actually have. It is worth mentioning though that this is less of an advantage now that members of the UK public cannot use credit cards in order to fund wagers. There is also the fact that cash payments are untraceable, making it more suitable for anyone who is particular conscious about their online fingerprint.

Survival of the Fittest

Paddy Power
Claudine Van Massenhove / Bigstockphoto.com

It is worth noting that we are discussing the future of betting shops as if they only have the option of continuing to operate the same way they do now. This however is not necessarily going to be the case. As we have seen in other industries, innovation can often be what keeps high street stores afloat.

When the FOTB stake reduction went into full force, Paddy Power and Betfred sought to wriggle their way around it by setting up new roulette style games. To ensure they did not strictly break the rules, at Betfred, punters had to go to the counter to place bets (of up to £500) while Paddy Power’s Pick ‘n’ 36 game only ran every three minutes. In both cases, the games were pulled after a very short period of time but even so, they are evidence that innovation and change are the only constants.

Thinking Outside the Box

These controversial attempts to bypass the new rules are obviously not the way forward and indeed the pair were rightly criticised at the time. However, what it demonstrates is that bookmakers are willing to think a little outside the box to try when it comes to increasing player engagement. There is no real reason why a bookmaker cannot propose a far less contentious idea that will help get people back in the stores. This is exactly what Ladbrokes Coral attempted to do when setting up a pair of ‘concept’ betting shops in Birmingham towards the very end of 2019.

Bejay Patel, strategy and business development director of Ladbrokes Coral, stated upon opening the first concept Coral store in Birmingham that:

The new concept shop has pushed the boundaries in terms of design whilst incorporating some of our latest technology, to create an enhanced experience for our existing customers whilst also appealing to a new generation of customers.

It was reported that customers generally responded very positively to this new, ultra-modern high street betting experience. The stores included various technological features such as a ‘departure board’ which showed all upcoming horse races supported by the Racing Post verdict.

Conclusion: High Street Shops Down But Never Out

Although we expect the number of high street betting shops to gradually decline over time, there is still enough interest for thousands to remain. There is plenty of incentive for bookmakers to stick with a high street presence as many of their clientele will not, or would rather not, take their business online.

High street shops also play a significant part in brand awareness and legitimacy and this is something that cannot be overlooked. Ultimately, the shops that can begin to offer a higher-quality environment are likely to stand a better chance of avoiding the axe. External factors, such as shifting demographics and varying rents, will of course play their part too but generally, the superior shops will not be leaving our high streets for a long while yet.