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Retail store survival rates decreasing 3 February 2014

The average retail store survival rate has dropped to 26%, according to FRP Advisory’s high street retail administration survival index 2013.

The restructuring and advisory firm analysed the 17 major high street stores placed into administration between 1 January and 31 December 2013. Considering the 2,000 stores affected in the administrations, 65%, or 1,300 stores have closed, with 11,000 of 21,100 jobs lost.

As a result, the retail store survival rate in 2013 fell to 35% from 50% in 2012 and 67% at the end of 2011.

Glyn Mummery, partner at FRP Advisory, said: “The UK high street has reached a tipping point. The sharp rise in mortality rates for major high street retailers that entered administration last year suggests that the economy will no longer support anyone with a broken model.

“The almost total disappearance from shoe shop chain Barrats from Britain’s high street – its third administration in four years and once boasting nearly 400 stores – shows that there are only so many times a broken model can be patched up without a nuts and bolts rebuild.”

There was a marginal improvement from staff survival rates in 2013, up to 48% from 46% at the end of 2012, but still lower than the 66% at the end of 2011.

The store and staff survival rate of three major high street retail administrations, Barratts, Blockbuster, and Osbornes Stationers, fell to a “record low” of 3%.

Mummery said: “The very concept behind certain retailers has been undermined whenever a product category such as electrical goods has moved online or disappeared altogether such as videos and DVDs with the arrival of downloads, culminating in the final demise of Blockbuster in the final quarter.

“The onslaught of online retailing has permanently disrupted the conventional retail model and an over extended bricks and mortar footprint will be the undoing of any retailer without a complimentary click and collect offering, and increasingly a renewed focus on customer service.

“With the economy picking up again across all sectors and rising employment any rises in consumer spending will not be spread evenly across all retailers – both an appropriate distribution a pricing model needs to be in place to benefit from the upturn underway.

“With interest rates unlikely to stay at their low rates for more than a year, retail managers will need to get their shops in order to cope with the new 3D high street of bricks and clicks.”

 

 

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