Insolvency services business Begbies Traynor has found that over 9000 UK online retail businesses are suffering from financial distress as the general retail downturn has now begun to more heavily impact those trading without a bricks and mortar presence. This is a 65 per cent increase in ‘cases’ over the last three years. The high levels of customer returns, as well as the costs of maintaining optimum visibility, are major factors now biting deeply into margins. Growing competition, both homegrown and from overseas is also making it far more difficult for pureplay online retailers and more especially the smaller, lesser known names to retain customers.
In its report published on Christmas Eve 2019, the firm also said that there was an overall total of 27,000 retailers in significant distress.
Julie Palmer, partner at Begbies Traynor summarised 2019:
“The year started with uncertainty for businesses with a decision on a Brexit deal and the nature of the UK’s exit from the EU set to be determined. Consumer confidence has suffered and as a consequence, it hasn’t just been the retail businesses that have suffered. Yes, we have seen the collapse of the likes of Mothercare and Karen Millen, while Arcadia has forced through a CVA, but the downfall of Thomas Cook has truly shaken the high street.
“However, with the general election over and MPs having passed the Government’s Brexit bill, businesses now have a degree of certainty enabling them to better plan for the future outside of the EU. Looking to 2020, it seems as if the accelerating numbers of online retailers in distress will continue. The competition online is ferocious, but the rewards for those that succeed – such as Boohoo are huge. In the New Year, strong leadership will be key. There are some tough decisions to be made and some hefty modernisations to bring forward. Even retailers that are performing well will have to keep on their toes. As Ted Baker will attest, 12 months is an awfully long time in retail. In the coming months, many businesses will have to make a decision on whether to stick or twist with investment, innovation and expansion.”
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