Gibson Hewitt, one of Surrey’s leading business recovery and insolvency specialists, has said a new report into the world of retail has shown why some businesses fail and others don’t.
Entitled Retail Disrupted – Welcome to The Hunger Games, the report has been prepared by a number of experts who work with INSOL – the International Association of Restructuring, Insolvency & Bankruptcy Professionals.
Having reviewed the report Gibson Hewitt feels that it reveals a number of things about retailers in the UK, including some hard truths about their business practices and reasons for their failure.
Lynn Gibson, Director at Gibson Hewitt, said: “This new report has taken an in-depth look at retail around the world and the latest trends the sector faces. It reveals significant shifts in the attitudes of both consumers and stores that companies need to be aware of.
“Where once many people wanted an ‘experience’ when they shopped, most people now seem to favour of the lowest prices and convenience, which is why the Amazon’s and other e-commerce businesses of the world are so successful.”
The report, in particular, indicates that between 2011 and 2016 casual shopping or browsing in-store has fallen from 49 per cent to 20 per cent, while online shopping has grown three per cent to make up 14 per cent of all sales globally.
However, the biggest change has been in web-influenced offline shopping, where shoppers use apps and searches to find the best deals online and then visit the store in person merely to view the product.
This type of shopping has grown internationally by 26 per cent during the same six year period according to the report and now accounts for 66 per cent of all sales.
In the UK, eCommerce represents 15.6 per cent of all sales, according to the study, which is higher than China (13.8 per cent) and the US (10.8 per cent).
This trend is growing quickly, especially as younger shoppers and so-called millennials increase their spending power.
“This major shift in the way consumers purchase products has hit small retailers the hardest, particularly those who may be less technologically savvy or who don’t have the resources to invest in a dedicated eCommerce operation,” said Lynn.
“However, it is becoming much easier for small firms to provide online sales, especially with the rise of dedicated Amazon and eBay stores, as well as other specialised web platforms – unfortunately in many cases, this ensures that large online retailers get a cut as well.”
Despite this trend, Lynn does concede that certain physical retail enterprises can still succeed without an eCommerce operation.
“Where a shop or business provides a bespoke product or where the experience of purchasing the object is part of its appeal businesses can still excel, but this is only true of a limited number of businesses,” she said.
The report also looks at the common reasons for business failure in the retail sector and Gibson Hewitt says that its findings are very telling. INSOL believes there are three commons reasons for failure, which revolve around:
- Brand and customer relevance
- Inventory execution
- Lack of business model innovation
Lynn said: “These three points are very much focused on internal factors within a business which may lead to failure and each has a common trend – a failure to innovate and change.
“When it comes to brand and customer relevance, the report highlights how many businesses fail to change and become stale or that in trying to change, the brand and strategy becomes confused, so businesses have a difficult balancing act to achieve if they wish to be successful.
“Meanwhile, failing to manage inventory effectively can lead to costly delays when supplying consumers, produces surpluses or can lead to outdated or unsuccessful stock being left to sit on valuable shelf space.
“It’s a hard pill to swallow but this typically is the result of poor management or a failure to invest in technology that can assist with inventory management.
“Customers want something new when they visit stores, so to see the same old ‘dusty’ product or outdated merchandising does not reflect well and will affect performance.
“Their final point is fairly self-explanatory, but is quite often the result of a fear of change or a desire to hang on to tradition. It is easy to look at previous years, see success and wish to replicate that exact strategy again and again, but it is just as important to innovate.”
Lynn says that thankfully it is never too late to rectify issues if they are identified quickly and action, backed by the necessary resources, is taken.
“Businesses, no matter their size, can restructure themselves to make the changes they need, for some that may mean looking at setting up a new website and downsizing their physical presence on the high street, whilst for others it could be changing the way they work with suppliers and manage stock to ensure continuity of supply for their best selling products.
“Whatever the case may be it is probably advisable for businesses to seek out professional help when identifying and rectifying organisational weaknesses within their business,” added Lynn.
