Owners Should Rethink Exit Strategy As Company Closures Increase

11th April 2018.

Sixteen shops are closing on the high street every day. The rate has doubled in a year, with the retailers blaming a perfect storm of rising prices, online competition and a slump in consumer confidence.

It has been a difficult year for the high street, with many retailers falling and some struggling to get back up. Most recently, Toys r Us and Maplin went into administration, and family retailer Mothercare is balancing dangerously close to the cliff’s edge. Business rates have skyrocketed, accompanied by interest rates and inflation, all creating a rather stifling atmosphere for those in trade.

New figures compiled by the accountancy firm PWC and Local Data Company, a retail analytics company, have shown that more and more shops are closing by the year. According to the new data, more than 28,000 shops have closed in five years, meaning that one in 38 stores have disappeared from the high street.

The sector has become increasingly competitive, with brick and mortar shops at war with the online competition. The pleasure many achieved through shopping sprees and days out on the high street have been replaced with the comforts of shopping from your own home. Websites like Asos and Boohoo.com have eclipsed high street fashion retailers, with only the cheap deals boasted by discount chains such as Primark, still capturing consumer interest.

Closing up shop is not the final or only option available for struggling businesses. While falling profits or tough competition may leave business owners dismayed, there are ways to not only avert closure but also build it up stronger than ever. At the Credit Protection Association, our debt recovery and credit management products free up cash flow and strengthen our members’ businesses, while our late payment compensation team members will also unlock hidden potential.

The figures from PWC showed that the number of new high street stores opening last year fell to 4,083, from 4,534 in 2016. Once the number of store openings is accounted for, the research shows that 1,772 stores disappeared from town centres in 2017. It was the second consecutive year that the number of store closures had risen.

Many retailers suffered a difficult second half last year as consumers pared back their discretionary spending in the face of higher inflation. The fall in the pound since the Brexit vote has caused the price of imports to rise for retailers and manufacturers, but shops have had to decide how much of the cost they can pass on without losing customers.

Lisa Hooker, consumer markets leader at PWC, said: “You have had the real effect of inflation, which has squeezed incomes. But you have also had the impact of business rates and the impact of the living wage, while footfall at shops is going down 1 percent each year because of competition from online retailers. We are experiencing a period of great change in retail, and the question around the relevance and role of stores is still very much on the industry agenda.”

More consumers are moving online for their buying needs, pressuring business owners to also make the move. Brick and mortar stores are more expensive and more difficult to command so adapting to e-commerce not only eases the daily grind but also gives the owner an edge in the competitive business world within the capital.

Affecting complacency and dismissing digitisation in favour of traditional concepts is not an effective survival tactic. Whether you’re a small business or a large conglomerate like Toys r Us, you are just as vulnerable to a fall in popularity as well as profits. Expanding your business and purchasing new equipment and technology is an easy way of gaining the public’s favour. Creating eye-catching websites and advertising campaigns are sure ways to catch the public’s attention and direct their financial interest.

At the Credit Protection Association, our debt recovery services free up cash flow for our business members, giving them the financial freedom to pursue expansion and grow their business any way they desire. This is offered in conjunction with our credit management products which improve their credit rating, as well as our Late Payment Compensation team who will investigate any money that is owed to them from historic late payers.

If you think you are in danger of becoming another insolvency statistic, don’t despair. If you are struggling with your cash flow and concerned for your business’ prospects, come to CPA first before you consider liquidation. We will recover bad debt, chase late payers, and put you back in the driving seat!