The high street has seen better days, with insolvencies and store closures arguably being the biggest highlights of June 2018.
There are numerous reasons behind the nation’s recent high street chaos. Retail Think Tank (RTT) experts have chalked it down to being the worst year for non-food retail since the financial crisis.
“A relentless squeeze on gross margins and costs have beleaguered companies at a time when sales are flat,” the RTT explained. “Brexit and consumer uncertainty led a charge in making the perfect storm.”
Ongoing structural changes and bad weather – from the aptly named “Beast from the East” – also resulted in widespread store closures. House of Fraser and Mothercare were among those to shut some doors.
Toys R Us and Maplin disappeared from the landscape entirely, while Poundworld entered administration. The latter’s struggles owe much to the weak pound, which increased import costs.
Deloitte’s own analysis on the matter said: “Like many high street retailers, Poundworld suffered from high product cost inflation, decreasing footfall and an increasingly competitive discount retail market.”
But these have been ongoing factors, we’re told. June served up a cold dish of reality, wherein it was suggested that an overwhelming number of companies are simply failing to evolve with customers. Especially in the online department.
Digital channels are what really knocked larger chains out of the park, dredging up the sentiment of adapt “or else”. Faced with competition from online retailers with huge product ranges, it’s been difficult for companies to continue with a traditional approach to retailing.
While the in-store experience is appreciated, the digital-savvy population has been overlooked. There is a balance that now needs to be struck. In fact, the I-AM 2018 Retail Sector Report found that a mobile-augmented in-store experience could be the key to drawing more customers in.
This was echoed by Tryzen research, which claimed 62% of consumers prefer to try clothes in-store before buying them online.
Commenting on the 2,000 respondent-strong report, I-AM Group partner Pete Champion explained: “Retail has undergone a seismic change. Though this has been largely driven by technology, consumer attitudes to what shopping is and does has sifted and our needs, platforms and spaces have converged. We no longer shop in specific bursts, rather shopping hums along at our pace of life.”
Retail has become something of a fortune teller industry, with it being a continuous chain-reaction of movements, events, experiences and motives.
Of course, a large number of jobs have been cut from the retail sector as a direct result. According to data compiled by the Press Association, almost 50,000 high street workers, from well-known chains to smaller businesses, have been made redundant or had their role put under threat.
“In June 2018 alone,” Simon Caldwell, deputy editor of Business Advice maintained, “the announced closure of dozens of House of Fraser branches saw 6,000 jobs put at risk, while Poundworld’s administration threatened 5,100 jobs.
“Spiralling business rates have put high street stores under pressure. Following last year’s revaluation, the average business rates bill for a department store in England and Wales increased by 26.6% to £717,952.
“Add that to the lethal cocktail of other increased operating costs for the national living wage and apprenticeship levy and it creates a recipe for 2018 being the year of the company voluntary agreement.”
Insolvencies seem to be a trend. Restructuring trade body R3 said this is normally the case when larger companies fall off the bandwagon.
In Q1 2018, following a spate of high profile insolvencies involving the likes of Carillion and Toys R Us, underlying insolvencies climbed 13% from the previous quarter. June has been no different.
Andrew Tate, spokesperson for R3, said: “No business exists in isolation, and every headline-grabbing corporate insolvency will have consequences for numerous other enterprises.
“In the worst-case scenario, the loss of a vital business relationship can lead to a company’s own insolvency in turn – the ‘domino effect’ in action. Recently, we have seen a string of insolvencies of high-profile companies, from Carillion to Toys R Us, which will have caused upheaval at other companies.”
If anything June has taught us, it’s to focus on what’s around you – the people and the companies you work with. Either one can impact you either negatively or positively – make sure it’s not the former one.