It’s not just santa who can bring a great gift
The struggle retailers face as they head towards Christmas is becoming more challenging this year due to the online sales boom which is set out to overtake physical purchases for the first time.
The increasingly quick adoption and acceptance of online shopping by customers has caused concern for primarily physical retailers across the UK and those who’ve been slow to adopt an online element to their business.
COVID-19 might seem to be the primary driver over the past two years, but the reality is that the coronavirus was only a short-term problem. It significantly highlighted the huge distinction between the traditional retail approach and the new competitors who suddenly appear to be overtaking existing retailers and those who have ruled the market for the past several years.
9,500 shops closed down in 2020 and another 8,700 retail chain stores closed their doors for the final time in the first half of 2021 alone.
Even when these retailers were able to begin to reopen, it was a different experience for the vast majority of their customers with many finding it difficult to navigate.
From social distancing measures, queuing to enter stores, wearing mandatory face coverings and other precautions made what was once a pleasure into an annoying pain.
Online retailers are now thriving, with more customers turning to online shopping first as a more modern and efficient way of purchasing products.
Richard Lim of Retail Economics: “Successful retailers have always had to reinvent themselves in order to survive and stay relevant. However, the pace of change will inevitably prove too fast for many.”
One in ten of all age groups recently surveyed intended to do even more online shopping in the next 12 months, much more than they planned to make any physical purchases.
They indicated that this is because the experience of online retail offered broader access and an easier ability to find the latest deals and promotions.
Additionally, it was perceived that websites now offered more exclusive sales and discounts than in physical stores. For example, percentage discounts over certain amounts, and discounts such as Student and NHS blue light discounts that would be automatically applied.
What are your options?
If you’re mainly a physical retailer and this Winter is critical for you then the good news is that there are some practical options to protect your business and buy critical time to make the changes you need to.
Administration sounds official and you might be concerned that so many retailers including names such as Topshop, Burtons and Debenhams went into administration before closing.
But there are a lot more success stories of retailers using the advantages that administration gives a business.
The process allows a business to remain open and trading, keeping their key staff while an administrator helps the company to become more efficient, effective and crucially, will stop all creditors’ actions against the firm while they work on their rescue plan.
The number of corporate administrations have risen for the past five consecutive months and now stand at their highest level in over a year.
This shows that many retailers realise the benefit and are taking advantage while they can.
Alternatively, your business might be trading well but be unable to make a profit due to unsustainable debt levels.
These might be historic and made worse due to the pandemic and trading restrictions brought about by lockdowns or might have grown suddenly due to taking out bounce back loans.
If this is what is primarily holding your retail business back, then you should perhaps consider a company voluntary arrangement (CVA).
It’s a formal legal process that has to be overseen by a licensed Insolvency Practitioner but will see a proportion of debts written off by creditors in return for a reduced, regular repayment of the remaining arrears usually for a period of five years.
Like administration, a CVA will halt and remove the threat of any legal action from creditors as long as the obligations of the agreement continue to be maintained.
The number of CVA’s approved has risen for the last three consecutive months so if appropriate, it might be the best solution for a retailer to truly turn around their fortunes in time for a brand new year.
Not every business can be rescued and revived – but many more can if they act
If you’ve tried everything and there’s no clear way forward to return to profit and pay off accumulated debts then an orderly liquidation might be the most appropriate solution.
It will treat all creditors fairly and allow the directors or business owners to settle all outstanding issues in an efficient and stress free way. Once a business is liquidated, then owners can begin again either with a new business without debt or can move in a new direction entirely.
The next few months, especially after the Christmas period, might look daunting for many small and medium sized retailers across the UK who can only see more questions than answers ahead.
This is where we can help – by finding answers to specific problems.
We offer a free, initial consultation with an experienced specialist advisor who will listen and learn about your unique challenges and then work with you to find the best solutions.
Get in touch with us today and take the first step on a new journey for you and your business.