Is Mothercare’s administration the confirmation of a new epidemic?
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It has just been reported this week that Mothercare has gone into administration, and it has subsequently been revealed that all Mothercare stores are to close.
The chain had 79 shops across the UK, and after the failure to find a buyer, 2,800 jobs are at risk, the Retail Gazette reports. Administrators from PwC said the company had been failing to make a profit for a number of years.
The challenges faced by Mothercare have ruined many other big high street retail businesses such as Bonmarché, who, after going into administration a few weeks ago, are now being forced to close 100 of their 318 stores if a new buyer is not found. High Street businesses are struggling to keep up with their online competitors, who have fewer overhead costs and who often offer cheaper products – stores simply can’t afford to match this.
These stories are forming a recurring trend across the retail industry. Debenhams went into administration in April this year, and Jack Wills, the upmarket fashion outfitter, went into pre-pack administration in August. Further still, reports are coming in that profits at Marks & Spencer’s are plunging, as clothing sales are decreasing rapidly.
The challenges that devastated all of these businesses revolve around the growth of E-commerce. Not only can online shops offer cheaper prices, but also a more hassle-free experience. Customers don’t have to spend time visiting the shop in person and paying for parking, which is becoming more and more of an inconvenience for customers.
On top of changing consumer habits, businesses are currently having to deal with increased business rates too. It has been estimated that increased business rates this year will result in UK high street companies having to find an extra £125 million in revenue. This is equivalent to an average yearly tax increase of around £3,663 for each small high street business. This is a cost which will affect the business owners who are already struggling to cope with the changing tides of retail.
All signs point towards this crisis as being the just tip of the iceberg, and many more high street retailers could fall into administration. It is most likely that small businesses will suffer the most in the time to come, but even big businesses are not immune to the issues affecting the UK’s economic climate.
It remains to be seen how many jobs will be lost due to the shift away from the high street to online, but one thing is certain – tough times lie ahead for the high street.
The latest information about retail businesses in the UK going into administration can be found on our website.