This year has already seen a spate of store closures across Yorkshire’s high streets.
Big-name national brands like House of Fraser have shut local outlets, while a series of local firms, such as Yorkshire Linen, have tumbled out of business.
And for others, there could still be difficulties ahead. From our own research, 35 per cent of retail businesses in Yorkshire that have a turnover of more than £12.9m are either showing signs of distress or are already in administration.
For traditional retailers with a core bricks-and-mortar presence, a rise in online shopping has made it difficult to compete with web-based competitors on elements such as convenience and price, particularly when factors like business rates and rents are thrown into the mix.
This ascendancy of the web in the retail sector is only set to continue. In the midst of this shifting landscape, it may be tempting for management teams to put their heads down and press on with business as usual, while ignoring signs of trouble. But in our experience, this approach is likely to only lead to even bigger problems further down the line.
To ensure the best chance of navigating this challenging environment, it’s essential that retailers address problems at the earliest possible opportunity before they get out of hand.
When we are brought in by company directors, we often find situations where businesses have been struggling for extended periods of time.
Often this has resulted in management teams funding operations out of their own pocket or building up unmanageable amounts of debt. By contrast, addressing challenges as soon as the cracks begin to show – or even well before – usually gives us the opportunity to offer more solutions.
In our experience, creditors are often more willing to restructure debt at the early stages of trouble. When given the chance, they’d prefer to find a solution that offers a return on their investment, rather than risk the entirety of what they’ve already put in.
Here, there are a number of steps that businesses can take to help pre-empt further issues, or to support their turnaround efforts.
As a first step, it’s essential that retailers closely review their operations to pinpoint weaknesses and identify the right solutions to apply.
Regular reviews of accounts, budgets and processes can help retailers quickly spot dips in profits, or highlight areas of their operations that aren’t pulling their weight – detracting from, rather than contributing to, their profitability.
Retailers may want to consider ways that they can support their cashflow to ensure they are in a position to carry on trading during times of lower demand, or to make strategic investments to capitalise on any new opportunities. An example of this would be using facilities that align with their trading cycle, such as stock finance.
Finally, businesses should review how they can adapt to market demands to ensure they’re in the strongest possible position for recovery. In an environment where e-commerce is now firmly established, retailers with a traditional bricks-and-mortar base may want to consider how they can adapt their operations to benefit from the online marketplace.
This could mean establishing, or overhauling, their online presence, or seeking advice from external consultants or a non-executive director experienced in the latest technologies and internet retailing strategies.
The future of our high street remains uncertain. But by acting quickly at the first sign of trouble, and seeking expert support, Yorkshire’s retailers can work to put themselves in the strongest position for success, whatever lies ahead.
By Phil Pierce, partner at FRP Advisory