Why is the Retail Sector Suffering?

News of high street retailers narrowly escaping insolvency has increasingly filled media outlets over the last few years, and it looks like the High Street crisis is set to continue as Retail Week have reported 16% of all retail units across the country are empty. At the end of 2018, figures from the Office of National Statistics calculated there were approximately 319,000 retail spaces in the UK, meaning that over 50,000 now lay vacant. Here we take a closer look at why the retail sector is suffering so badly.  

Online Shopping 

The biggest reason for the High Street decline is the surge in online spending. It is estimated that as many as 1 in 5 purchases are now made online. The rise in smartphones has made it even easier to compare prices and shop on the go, without the need to visit a physical store. Some High Street retailers, such as Apple or Primark, have been innovative in their approach, focusing on customer experiences to encourage consumers through the door. However, others have simply struggled to adapt and are now no match against new giants Amazon, ASOS or Boohoo. The most recent example of this would be Topshop and Sir Philip Green’s Arcadia Group.  

Growing Costs  

The minimum wage increase, along with rising rents has put retail at a big disadvantage. Brexit and the fall in the value of the pound have also meant that sourcing goods overseas has made businesses worse off than they were a few years ago. The High Street has also struggled with the burden of non-domestic business rates, although the apparent intention of both contenders to be the new Prime Minister to review this provides a flicker of hope in this area.

Shoppers  

Inflation rose by 3% last year, whilst wages only increased by 2 – 2.5%. There has also been an increase in borrowing as consumers try to maintain the same standard of living. Young people are now also far more likely to be renters than owners of their own home, directly affecting the sales of household goods and limiting the storage consumers have for new purchases.  

Closing Cycle 

The closing down of stores is becoming a cyclic effect. As more shops shut their doors, businesses are finding that they become less appealing to consumers, contributing further to the retail slump.  

Chamberlain & Co are an experienced insolvency practitioner with a wealth of experience in all industries. We can help advise you the best course of action and help with the restructuring process. For more information, give us a call on 0113 242 0808 or contact us here.