As e-commerce platforms continue to grow, the British high street continues to decline. Several big-name brands including Mothercare, and Thomas Cook have ceased trading, with experts citing the tough retail climate as the reason for their failure. Here, we find out how this happened and take a look at some of the most troublesome problems that retailers must face.
Mothercare was founded in 1961, building a strong retail presence in the UK. It also operated internationally, with franchises in Europe, Asia, the Middle East, and Latin America.
Administrators were called in on Monday 4th November after the company said it wasn’t capable of continuing to trade at a profit. Despite a buyer for the current UK assets being sought, one couldn’t be secured so there will be a phased closure of all remaining 79 UK Mothercare branches. Almost 2,500 jobs are at risk within the business, contributing to the striking statistic of over 85,000 retail jobs disappearing within the past year. The number of employees affected by failing companies has experienced a stark increase in the period 2017-2019. While the figure is yet to match the 74,539 that were affected by administration processes in 2008 in the height of the financial crisis, a staggering 42,105 have been hit by the downturn in their roles since early November 2019.
Mothercare announced losses of over £36.3m in the last financial year. This, along with excessive rent bills, wage increases and booming business rates increased the company’s outgoing expenses.
The business was already in a CVA process, closing 55 stores where losses were most prevalent and completing the sale of the Early Learning Centre brand to try and return to solvency. The company said: “Since May 2018, we have undertaken a root and branch review of the group and Mothercare UK within it, including a number of discussions over the summer with potential partners regarding our UK Retail business”. These moves came to no avail, and they’re representative of the struggle that many other retailers have attempted to tackle.
Brands such as New Look, Homebase, and Carpetright have all sought restructuring plans to try and avoid mass closures, and each occurrence of liquidation or insolvency sends the same troublesome shockwaves across the industry.
Chris Horner, Insolvency Director with Business Rescue Expert said: “Sadly, today’s news isn’t a surprise for keen watchers of business and financial news. It also looks unlikely that someone could come along and buy the brand in its entirety without looking to make further cost-cutting measures across the board.
“People can find the same products online for a cheaper price and don’t have to visit the store physically, which can be a difficult juggling act for new parents”.
The parenting sector is facing widespread struggles though, as Mothercare’s direct competitors Mamas and Papas reported its second consecutive year of profit losses.
The number of shoppers on the UK high street has fallen by 10% in the last seven years, and as more and more high-profile brands fall victim to the changing times. Shopping habits are changing, and by failing to acknowledge this the consequences for a business can be difficult to salvage.