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Thousands of retailers face post-Christmas collapse

Thousands of retailers will be pushed to “breaking point” in 2017 as they face a perfect storm of lacklustre Christmas trading, heavy discounting, higher staff costs and the weakness of sterling, research has shown.

The number of retailers in “significant” financial distress has increased by 6% on this time last year to 21,802, said the report by business recovery firm Begbies Traynor.

Almost all (97%) are small and medium-sized retailers.

Begbies Traynor warned the situation would come to a head at the turn of the year, when large quarterly rent bills are due.

Julie Palmer, partner at Begbies Traynor, said: “Retailers were hopeful that 2016 would be a bumper year for Christmas sales, after reports that credit card debts hit a record high in October.

“But with rising transport and fuel costs continuing to drive up the cost of living and drag down consumer spending power, it seems that this momentum has not continued into the festive period, with levels of financial distress among retailers now even higher than last year.

“Prolonged discounting, minuscule margins and higher staff and input costs as a result of the new, higher national living wage and sterling’s weakness mean many retailers are being pushed to breaking point.”

She added: “Small businesses, whose margins and cost bases are already stretched to the limit, are undoubtedly the biggest victims of the increasingly cut-throat UK retail environment, unable to compete on price or provide the convenience that savvy shoppers increasingly demand.

“With the sector’s quarterly rent day just around the corner, retailers across the country will be pinning all their hopes on a last-minute sales surge from shoppers who have left it too late for online deliveries to help tip them over into the black.

“Unfortunately, without a strong end to 2016, I’m afraid many smaller retailers in particular may not survive much beyond the January sales.”

Readers' comments (2)

  • Thierry BAYLE

    Hard to read this info. Always sad to see retailers disappear.

    However when I see that there is heavy discounting, it forces me to highlight a big retail challenge that many retailers fail to grasp properly:
    Buying and merchandising.

    Getting the right product at the right time in the right quantity.
    It is about Art and Science and sales can be forecasted at 90% accuracy with the right experience (internal or external).
    For example, another case study over the Xmas period when a prospect had 1 product class doing over 30% of the business (shirts) yet the retailer was not tracking monthly sales and stock for the sub classes (short sleeve/ long sleeve).
    Do you need 30% short/ 70% long or the reverse?
    He did not know.
    Consequence: losing sales in one class + excess discounting in the other...
    We therefore need more training and we cannot only blame the economy, the weather... things we do not control!
    Thierry Bayle

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  • There are still too many retailers, many with unsustainable business models. Coupled with too much product, being sold too cheaply. There has to be more casualties as we do not need the level of shops we have, but retailers are their own worst enemy as they forsake margin. We must go back to stocking less and more manageable product whilst retaining higher margins. The 'market trader' philosophy of which some retailers still crave is very much a thing of the past.

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