A Tough Christmas Leaves Small Retailers Worse Off than Last Year

A Tough Christmas Leaves Small Retailers Worse Off than Last Year
While online sales are up this Christmas, smaller retailers without the resources to compete with big brands online are in significant financial distress.

Smaller retailers across the UK have endured a tough Christmas in terms of sales, despite footfall levels being stronger than expected.

The packed high streets have led to a bumper Christmas for the more established retailers, while many smaller operators have been left in financial distress.

The latest research from a leading firm of UK insolvency experts has revealed that steady footfall on the high street has masked a Christmas which saw the big stores win out over smaller, independent shops.

Black Friday was a dark day for small retailers

Part of the trouble for smaller shops was caused by Black Friday, which led many stores to discount their prices and slash their margins. However, unlike large retailers like John Lewis and Amazon, many small stores did not experience a significant increase in sales volume.

A spokesperson for the firm conducting the research said: “Black Friday was lauded as the biggest day of retail sales this year, but it seems the only real winners were the largest online retailers and big brand high street chains with the biggest discounts and best online offerings.

“In a bid to compete, the rest of the UK retail industry has been forced to slash prices and profit margins, but unfortunately sales volumes have failed to keep pace as Christmas shoppers across the UK have been particularly thrifty this year, taking advantage of the considerable discounts on offer.”

Over 24,000 retailers report significant financial distress

The effects of Black Friday, a mild autumn and an increase in the proportion of sales made online have all played their part in the struggle faced by smaller stores. The statistics reveal that 24,252 retailers across the UK are now suffering from ‘significant’ financial distress, compared to just 15,792 at the same time last year. This represents a year-on-year rise of 54 percent.

Two of the worst hit industry sectors are food and clothing retailers, which have experienced significant increases in year-on-year financial distress of 70 percent and 123 percent respectively.

£3bn spent in Boxing Day sales cannot save retailers

According to a survey of consumers by the comparison website Money Supermarket, UK shoppers planned to spend nearly £3bn on the first day of the sales alone. While this might sound like excellent news for small bricks and mortars retailers, market analysis Experian has revealed that £500m of these sales will be made online.

The growth in online sales has hit new heights this Christmas, with Christmas Day seeing a 36 percent rise in online shopping compared to Christmas Day last year.

Experian spokesman Nick Jones believes the online figures are promising. He said: “The figures for the festive period have confirmed a big jump in online spending on Christmas Day compared with last year.

“Retailers have been getting better at connecting with their customers and people are shopping online as a leisure activity. The shopping season now starts with Black Friday promotions and then online is ruling the roost right through to the middle of December when footfall picks up again. Then, after Christmas, people are getting back on their smartphones.”

These sentiments will bring little solace for smaller retailers, many of whom struggle to secure the search engine real estate they need to compete with the bigger brands online.

The global footfall analyst Ipsos Retail Performance has revealed a 4.7 percent decrease in footfall on Boxing Day this year compared to 2013. The decline is the result of online retailers launching their sales on the 25th, a move which has proved extremely popular with consumers but has sapped some of the lures of the traditional Boxing Day sales.

The lack of footfall will be felt in the tills and affect cash flow in Q1 2015 so we can expect to see a rise in retail insolvency I suspect. If you are concerned about trading whilst insolvent then you must seek professional insolvency advice. To speak to a consultant now about your concerns call 08000 746 757.

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