24 Dec 2012

Death of the high street looms again in 2013

A miserable year for the high street will roll over into 2013, research says, with “critical” financial issues now facing 140 retailers.

Law firm Begbies Traynor, which specialises in corporate recovery, claims that 2013 will see a rising number of high street shops facing an uncertain future.

The research, which measures the number of companies in financial distress, said the large amount of retailers with financial problems comes even though it is the peak of the “annual cash cycle” – meaning they should be in their best financial position of the year.

A number of factors have hit retailing this year, including the wet weather and wider problems in the economy.

In total 140 retailers, from single retail outlets to major national chains, are on Begbies Traynor’s “critical watch list”, meaning the company thinks they are unlikely to survive in their current forms for the next 12 months.

‘Tip of the iceberg’

Book retailers, off licences and independent chemists are facing particular pressure, Julie Palmer, a partner at the law firm, said.

“Though the performance of national retailers is well documented, it represents just the tip of the iceberg with thousands of smaller and specialist retailers struggling to stay afloat in today’s Austerity Britain,” she said.

Shoppers on London's Oxford Street (Reuters)

“While book sales usually peak in the run up to Christmas, the move by consumers to use traditional book retailers simply for window shopping before purchasing online at discount prices has seriously impacted this sector, which has already suffered considerably from the growing popularity of e-book readers.


“This practice known as “showrooming”, where shoppers visit high street stores to try a product before using a smartphone or tablet to find the best price online is just one of the ways that cost-conscious consumers have embraced the new culture of austerity this Christmas.

“UK consumers have been saving their shoe leather this festive period by shopping at supermarkets and large department stores, focusing on the perceived value of getting all things in one place while avoiding the cost and hassle associated with town centre parking.

“This trend has impacted the financial stability of independent chemists and alcohol retailers in particular who have struggled to compete against the supermarkets’ prices, low-margin promotions and the convenience factor for consumers of a one-stop shop.”

The quarterly rent day, when retailers pay their rent, falls on Christmas day this year, and, combined with consumers “tightening their belts” after Christmas, this could lead to significant pressure for retailers.

“We could well see a surge of new insolvency activity during the first quarter of 2013,” Ms Palmer said.

Sales come early

The growth of online retailing is also evidenced by dozens of retailers opening the traditional Boxing day sales on Christmas eve on their websites.

A number of retailers have now begin online sales. Of the major retailers, Marks & Spencer has begun its sale, followed by John Lewis at 5pm and Currys/PC World at 7pm, according to the Daily Mail. Amazon will start its sale on Christmas morning.

The British Retail Consortium has predicted that there will have been £5bn spent between Saturday and Christmas eve by UK shoppers. Richard Dodd, head of media and campaigns, said: “People have left it very late this year because of their reluctance to spend – they are holding out for bargains – and we’ve had a final weekend just before Christmas.

“It’s been a very busy weekend which will be crucial to delivering a Christmas that is acceptable, rather than exceptional.”

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