Martyn Pullin, partner at specialist business advisory firm FRP Advisory LLP in Teesside, discusses the challenges facing the retail sector, and steps local businesses need to take if they’re experiencing difficulties.
The first half of 2018 has been tough for the retail sector as high-profile administrations and restructures continue to impact high streets across the country. In fact, it’s thought that in the first half of 2018 around 1,334 major retail stores shut or were earmarked for closure, and this put approximately 23,400 jobs at risk*.
Closer to home, the ongoing closures have hit high-streets across the Tees Valley particularly hard. Toys R Us and Maplin, both of which had stores in Teesside, closed in the first half of the year and with the Darlington and Middlesbrough branches of House of Fraser set to shut soon, many people are worried about the impact it could have on independent retailers across the region.
The local impact
Speaking to smaller business owners in the Tees Valley, there is a concern about the impact on footfall that the larger stores moving away from town centres will have on local high streets.
With a reduced variety of brands, high parking costs and a limited number of products on offer, some believe that shoppers will stop visiting their local high street in favour of out of town retail parks or larger cities.
The rise in popularity of online shopping is also a challenge for smaller retail businesses. Despite new initiatives to encourage consumers to shop local, research from Kantar revealed online sales rose from 11.6 per cent to 24.1 per cent between 2012 and 2017**, with quick delivery times, higher volume of stock and guaranteed speed of delivery proving popular with customers.
But, it’s not just independent retailers that are struggling to compete with the online offering. A number of larger brands are closing physical stores and expanding their e-commerce offering to meet changing consumer habits.
What can businesses do?
It’s never easy to trade in challenging conditions, but in times of difficulty it’s vital that retailers try to differentiate themselves and offer consumers a unique shopping experience.
Establishing an online presence is also recommended. It can widen a business’ customer base and enable consumers to order a product or check stock before visiting a store. However, launching and maintaining a website can be costly, and a company may need to seek extra investment for it to be effective.
If a business is experiencing difficulties then early intervention is key. We often find that when we are engaged by a retailer they have been living hand-to-mouth for some time, running up large debts or subsidising the company through their own means. With claims now more expensive for creditors to pursue, this hand-to-mouth existence can often have been going on for some time.
The likelihood of being able to revive a firm is far more achievable when there is time to consider all possible options. When every route can be evaluated, there is often the ability to develop a plan that allows the company to stabilise and build stronger foundations to prosper over time. We often find creditors are also more willing to restructure debt when approached early, as they are keen to work with a business to get some return rather than see it collapse entirely.
There is no doubt the UK’s retail sector is undergoing a huge transformation, and with reported uncertainty now surrounding brands such as Poundworld and Debenhams, there are no signs it will slow down any time soon.
At the first signs of trouble, reaching out to a trusted advisor can be key. Early intervention and the right support could help retailers across Teesside turn the tide and future-proof the business to successfully adapt to the changing retail environment.