UK retailers face challenges

10 April 2012

LONDON: Retailers in the UK face further challenges in adapting to changing consumer needs and industry trends, as the sector undergoes an increasingly rapid transformation.

According to estimates from Deloitte, the business services firm, 69 retailers in the country fell into administration during the first three months of 2012.

This marked an increase from the total of 60 recorded across the same period in 2011, and could also be measured against the figure of 42 registered during the closing three months of last year.

"Whilst the quarterly rent day often sets the timing for the insolvency, a significant trigger in a number of recent administrations is that many retailers have too many marginal stores," said Lee Manning, restructuring services partner at Deloitte.

Some of the companies included in the company's most recent quarterly list were Peacocks, the apparel specialist, Game, the computer games network and La Senza, the lingerie chain.

Blacks, the outdoor retailer, and Past Times, which sold a range of gifts and novelties, featured among the operators suffering the same fate.

Almost 10,000 of the 22,000 employees from the 69 retailers entering administration in Q1 2012 lost their jobs, while the 15 largest insolvencies saw 1,350 out of a collective 2,800 stores close.

More broadly, Deloitte suggested that declining consumer spending, the emergence of new habits, the rise of ecommerce, combined with, fixed costs, have worked to present substantial obstacles.

It also predicted that some chains would have to reduce the size of their store portfolios by up to 40% in the coming five years as trading conditions continued to develop.

Manning said: "In order to remain competitive, some retailers will need to rethink their business models to be nimble and adaptable to changing consumer trends."

As the number of firms entering administration excluding retailers declined from 497 during the first quarter of 2011 to 447 in the same period in 2012, it seems the sector remains especially troubled.

"Whilst conditions undoubtedly remain tough, the year-on-year decline is a positive indicator and gives a glimmer of hope that some industries are potentially over the worst," said Manning.

Data sourced from Deloitte; additional content by Warc staff