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23 Dec 2013 08:23am

Online retailers face increased financial problems

The proportion of UK online retailers facing “significant” financial problems is almost double that of all retailers

According to figures from Begbies Traynor, the total number of retailers with problems has risen 15% to 15,792 over the past year. But there has been a sharper rise, of 28% – from 1,421 to 1,816 – for web-only retailers.

“A flush of online start-ups, which are typically at higher risk of failure in the early stage of their life-cycles, has driven a significant rise in financial problems in non-store retailers,” said Julie Palmer, a Begbies partner.

“Many of these are falling victim to larger online and multi-channel competitors who offer lower prices due to greater buying power.”

Many online retailers feel pressure due to multi-channel retailers, who can appear higher in search engine results, and the dominance of online retail giant Amazon, which said it was preparing for a surge of shoppers on Christmas Day.

There are 151 British retailers facing “critical” financial problems – up 8% on the same quarter last year. This adds to other suggestions that many retailers are facing a difficult Christmas, with department stories Debenhams and Marks & Spencer both offering high levels of pre-Christmas discounting.

In contrast, however, retail stalwart John Lewis said it has experienced a last-minute surge in spending, with weekly sales of £164.4m, up almost 10% from the previous week and 4.2% from last year.

Begbies also said a 20% rise in problems among food, drink and tobacco retailers reflected the damage being inflicted on smaller shops by supermarkets expanding into their own convenience store formats.

Helen Roxburgh

 

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