The first quarter of 2018 has highlighted that high street retail continues to struggle. This year, casualties have included some big names with Maplin and Toys RUs going into administration and New Look, Mothercare and Carpetright announcing store closures and entering into negotiations with landlords to try and bring down crippling rents.
High street retailers are fighting battles on multiple fronts. Rising wage costs through the imposition of the living wage has particularly impacted retail due to their reliance on low-paid staff. Whilst crippling rents and business rates remain a constant challenge. A weaker pound has damaged margins on imported goods and higher fuel prices have meant increased logistics costs. Economic uncertainty has meant that consumers are spending less and of course consumer preference for online shopping continues to increase.
What can smaller retailers learn from the mistakes of these falling giants?
Whilst cost-cutting and right-sizing have been top of the agenda, responding to the changing retail landscape and adapting traditional models to embrace today’s challenges is the key to survival.
Find your niche
As a small retailer, you might not be able to compete with bigger or online brands on price but your USP could be product knowledge and specialist advice or products that aren’t stocked by mainstream suppliers. Recognize consumer’s shifting preferences A smaller business has an agility advantage that the retail giants don’t have. Small business owners should pay close attention to new technology, evolving consumer expectations, and competitors. You cannot plan your own company's future if you don't understand where your industry and customers are headed.
Keep them coming back for more
Maximise your advantage in being able to offer a pleasant environment for browsing where customers can ask a knowledgeable human being for advice with an immediate reply and actually see and feel a potential purchase. Great customer service which is responsive to demand, sound product knowledge and the personal touch are going to keep your customers coming back.
Meet your customers where they are
Being an independent retailer in your local community you can get to know your customer base and respond to its preferences in a way that the big boys can’t. Chatting to customers, being involved in your local chamber of commerce, having links to local relevant clubs and groups, joining online local forums or social media pages, will all inform your business and help you tailor your product or service offering to be relevant, appropriate and inviting to your local customer base.
Keep moving forward
In our digitally obsessed age, retailers need to be digitally innovative too. Products need to be offered through a multi-channel approach which is as streamlined and convenient for customers as possible and which complements and enhances your in-store offering. Services such as ‘Click and Collect’ are a great example of bringing the online customer into the store where further purchases may be made.
When trouble strikes, are CVAs a successful rescue remedy?
In recent months Toys R Us, New Look and Carpetright have all turned to a CVA (Company Voluntary Arrangement) as a way of cost cutting and right-sizing their businesses to avoid collapse. This restructuring tool has enabled these retailers to achieve improved lease terms with their landlords, reduce rent bills and where necessary close unprofitable stores. CVAs have also provided agreements with creditors that give breathing space to these struggling businesses so that strategies to return to more successful trading can be implemented.
CVAs are not just for the retail giants, they can provide a flexible and cost-effective turnaround vehicle for small and large companies alike.
They allow businesses facing pressure from creditors to ease the burden of temporary debt or a cashflow crisis by lowering monthly outgoings and arranging with creditors for debts to be repaid on a longer-term basis or perhaps re-structuring rent obligations or negotiating changes to lease terms to cut ongoing costs.
However, for a CVA to be appropriate and successful, your business needs to be viable and capable of recovery – innovating or re-inventing if necessary. The Toys R Us CVA failed to save the business because, whilst cost cuttings were implemented, there was no serious attempt to change the structure or ethos of the business. It remains to be seen whether New Look and Carpetright will make the necessary changes across their businesses to avoid collapse.
If you are experiencing financial difficulties and would like to discuss your options with a business turnaround and insolvency specialist, contact us for a free, no-obligation chat about your business on 0118 973 7776.