Retailers face critical problems ahead despite festive flurry in stores
DESPITE the late flurry in Christmas shopping, research from insolvency specialist Begbies Traynor, predicts that around 150 UK retailers are facing “critical” financial problems.
Despite the improved economic conditions, the number of businesses in severe trouble is up 8% from the fourth quarter of 2012, while the number of retail businesses with “significant” financial issues rose by 15% to 15,792.
Manchester-based Begbies Traynor, which operates nationwide, said that problems are particularly acute for retailers that either don’t have a convincing online offering, or don’t benefit from high levels of customer retention and satisfaction. Traditional bricks and mortar retailers may be bneing affected by higher fixed costs from business rates and rental payments, the firm adds.
Interestingly its research reveals that trading online is not a guarantee of success. Although online sales in the UK rose to a monthly record of £10.1bn in November, Begbies Traynor’s research reveals that 1,816 non-store firms are currently in “significant” financial distress, a rise of 28% from the equivalent period last year.
Gary Lee, partner at Begbies Traynor, commented: “A flush of online start-ups, which are typically at higher risk of failure in the early stage of their life cycles, has driven a significant rise in financial problems in non-store retailers.
“Many of these are falling victim to larger online and multi-channel competitors who offer lower prices due to greater buying power, increased visibility from better search engine rankings, or the convenience of click-and-collect.”
Those retailers that have experienced the highest increases in “significant” distress include second hand stores and market stalls (up 29%) and food, drink and tobacco retailers (up 20%) whilst electrical goods merchants (up 16%) and clothing and footwear retailers (up 12%) are also showing evidence of further pressure.
Mr Lee added: “The big supermarket chains began their Christmas promotions earlier than ever this year, while they are also aggressively expanding into the convenience and express store market, causing smaller food and drink retailers to suffer most in the lead up to Christmas.
“Unable to compete on the range of goods they offer, combined with the growing trend for consumers to do their festive food shopping online for the best deals, local shops can be expected to continue to suffer as this relentless competition and price pressure persists.”
