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Retail sector must master multi-channel shopping to survive recession, expert says


Big-name retailers will emerge from the current economic slump with bright prospects if they tailor their businesses to suit consumers' shopping habits, an expert has said. Accountancy firm Deloitte has reported an increase in the number of retailers going out of business.

Retail expert Tom Leman of Pinsent Masons, the law firm behind Out-Law.com, said that retailers that adapt to the trend of decreasing sales on the high street and the growing online market would prosper.

Leman's comments came after research by accountancy firm Deloitte revealed that the number of retail administrations reported in the first three months of the year had risen by 15% on the same period last year and by 64% compared to the final quarter of 2011.

"The figures are evidence of the working out of the structural overhang of bricks and mortar in the UK rather than a sign that UK retail is dead," Leman said. "Those retailers that have fallen over were brands that were struggling to explain their offering to the consumer and the excess debt/rent/rates overhang for those with excessive property portfolios simply hastened their demise."

"Retail is still an important part of the UK economy and there are many brands that are very successful, both here and overseas," he said. "Provided those great brands can navigate their way through the multi-channel shopping challenge, don’t have excessive debt nor too much exposure to real estate they will come out of the recession smelling of roses."

The Deloitte research revealed that 69 retailers went into administration between January and March this year compared to 60 in the same three months at the start of last year and 42 between October and December 2011.

"These figures should be no surprise given the unspectacular performance reported on the high street during the Christmas period," insolvency law expert Alastair Lomax, also of Pinsent Masons, said. "Indeed the reality is almost certainly worse than the statistics suggest."

"Many struggling retailers have pursued alternative routes to administration, such as a company voluntary agreement, to reduce overheads, restructure their debts and survive. This is more bad news for landlords, suppliers and staff in the outlets at risk of closure," Lomax said.

Lee Manning, a partner at Deloitte, said too many "marginal stores" were causing retailers problems.

"As online retailing continues to grow whilst overall spending is weak, the fixed costs and poor performance of some stores drags on the overall business," he said.

"The first quarter of 2012 is particularly significant given the high profile nature of the companies we have seen enter administration: Peacocks, Game, La Senza, Blacks and Past Times. The number of job losses that came as a result of these administrations was almost 10,000 out of the 22,000 employed by those companies. In contrast, Q1 2011 saw far lower levels of job losses. Overall, for 2011 and the first quarter of 2012 the largest 15 retail insolvencies had 2,800 stores and only 1,350 stores have survived; an attrition rate of 52%," Manning said.

"In order to remain competitive, some retailers will need to rethink their business models to be nimble and adaptable to changing consumer trends. A fast-changing retail environment will require certain businesses to reassess their store portfolios, not as a matter of choice, but in order to survive," he said.

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