The high street crisis in 2018 saw retail chains such as Toys“R”Us and Maplins collapsing into administration, whilst a number of others, such as Marks and Spencer, confirmed plans to close down some of their traditional high street stores.
Already this year, retail group Arcadia has entered into a rescue deal in an attempt to save itself. But with an ever-changing retail landscape and constantly changing consumer demands, what can retail businesses do to stay away from bankruptcy in 2019?
Keep up with your online rivals
It is unsurprising that high street retailers have suffered over the past few years, with the internet making it possible to purchase goods from pretty much anywhere with only the click of a button.
With online shopping on the up and giants such as Amazon providing a one-stop shop and competitive delivery options, consumers have even less of a reason to head to the high street.
As such, retail businesses have been met by a number of challenges, and retailers who struggle to adapt to the demand for online shopping could find themselves on a slippery road to bankruptcy.
Investing in e-commerce and ensuring you have a stable and robust platform that is flexible enough to adapt to changing consumer demands is crucial in this ever-changing climate.
Retail businesses can also widen their horizons by appealing to young consumers through a strong social media presence. Retail businesses wanting to stay out of the red should invest in a marketing strategy that opens doors to this younger generation and seek out potential new customers who are more likely to find their inspiration for purchases on the web.
Forecasting and managing debts
As with any business, a steady cash flow is crucial in order to stay out of bankruptcy. Having an in-depth understanding of the business’s financial movements and successful forecasting can help retailers identify when to expect a surge or decline in sales and prepare for them. Having the appropriate and applicable data and managing cash flow effectively will give a retail business more time to spot, prevent or prepare for any potential financial difficulties that might crop up in the future and avoid entering into bankruptcy.
Debt can have a crippling effect on any retail business if it isn’t managed correctly and anticipating tax and capital expenses is crucial. Even once thriving companies, such as Toys R Us which fell into administration after it struggled to pay its £15m tax bill, can fall foul of mounting debt and hungry creditors.
Having an increasing amount of debt will also leave your retail business without the financial freedom and stability to be able to invest in e-commerce or in-store improvements, both of which can help build a retail business and keep it out of trouble. According to Hasib Howlader, owner of Hudson Weir , managing debt repayments and keeping on top of tax bills and other capital expenses is also important if a retail business wants to stay away from bankruptcy.
Speculate to accumulate
As competition with the online giants becomes increasingly apparent, so too does the increasing number of discount stores and outlets popping up in place of the once thriving large chain and department stores.
Often, the instinctive way for retailers to move forward is by opening more stores. But before this knee jerk reaction businesses are advised to consider the impact of doing so.
Store expansion may be seen as a marker of success, but a retail business can be at risk of bankruptcy if it is overpopulated. Last year, Marks and Spencer announced the closure of a number of its high street stores, admitting that doing so was vital for the company’s future.
Being saddled with too much retail space can cause a business to buckle under the financial weight of high business rates, overheads, rent, staff salaries and even things such as gaps in pension funds, as Sir Philip Green’s Arcadia Group faced earlier this year.
With the high street on a decline, businesses need to be realistic about the number of stores they can financially justify and think strategically about how much better placed their goods and services might be online. Having a smaller number of profitable stores can help a retailer survive in the long run.
Invest in customer experience
While a retail business may benefit from reducing their retail space, it’s important not to compromise on customer experience. Businesses should be careful not to under-invest when it comes to the stores left standing, as the success of these can have a direct impact on online sales too. Reinventing stores and focusing more on in-store events can lure shoppers in, whether they make the purchase whilst there or later at home.
With an increased focus on service and experience, retail businesses benefit from listening to shoppers and understanding what it is that makes them come back for more. While customers may go online for many of their purchases, stores still act as the face of a retailer’s brand.
Retail businesses that spend time developing their strategy to ensure customers are given an effective and personalised service will benefit in the long run. Having an in-depth understanding of customer interests can help a retail business create a desirable shopping experience, giving shoppers more of a reason to go there. Marketing products effectively and staying relevant will have a positive impact on overall sales, which is crucial to helping a retail business stay away from bankruptcy.
Be a smart retailer
Being sure to offer either value, convenience or experience is crucial if a retail business wants to stay away from bankruptcy, especially with the ever-growing demand for online shopping.
Retailers should be constantly thinking about how they can evolve and adapt to changing demands and consumer trends in order to prevent a decline in profits. Retailers that are able to differentiate themselves from the competition and demonstrate to their customers that they know and understand them will help keep the business relevant.