Two high profile retail administrations this week as we drift back to work provide a stark reminder that the high street has moved firmly online. Their woe is reinforced by the huge volume of New Year emails from what are now web-first retailers, promising big reductions, free returns and yet more incentives if we buy right away.
Up to 2,500 jobs are at risk as Claire’s and The Original Factory Shop, both owned by Modella Capital, enter insolvency processes. Modella, which bought high street chain WH Smith last year, says tough trading conditions and “alarming” low Christmas sales had left both in a “vulnerable” position.
Napoleon would struggle to call England a nation of shopkeepers these days, if the present malaise in the retail sector is an indication of things to come. Sales in November eased by 0.1%, and anecdotal evidence of pre-Christmas shopping paints a subdued picture. Weak consumer demand is combining with a range of increased costs, including a higher minimum wage and employer’s National Insurance. Cash strapped shoppers, generally fearful about job security in 2026, are expected to keep their wallets shut until the spring; at the same time, many retailers face the risk of a business rate increase when a national revaluation takes effect in April.
The Centre for Retail Research believes that the tally for UK store closures in 2025 will have topped the 17,000 seen in 2022, a five-year high beating even the peak of the Covid period. High street giants reporting closures of units include New Look, Poundland, River Island and Hobbycraft (also owned by Modella). However, the retail sector has been undergoing major structural change since well before Covid closed stores for months and turned already thin margins into losses.
The high street’s death by a thousand cuts reflects seismic change in many consumer sectors, an ongoing shift in shopping patterns that will continue to remove capacity from the town centres until retailers take drastic steps to adapt to the new order. Retailers will continue to shrink unless they provide an engaging in-store experience for millennial consumers who have almost grown up shopping online, as well as demanding discounts. Most of these need a very good reason to venture beyond their front doors to partake in discretionary shopping as a leisure activity. Analysts estimate that the e-commerce penetration rate in the UK is close to 85%, making it the most developed online market in Europe.
Throw in data security, investment in store technology, price wars and permanent ‘Sale’ periods, not to mention logistics and seemingly endless supply chain problems, and it’s clear that business owners and management teams are having to keep moving just to stand still.
Operators in this tough sector, from owner-managed single store units to national chains, must develop creative and flexible strategies to protect themselves from seemingly endless volatility. In that way they might stand a chance of succeeding when trading environments eventually become more benign. Retailers should, sooner rather than later, seek professional advice on tenancy and rent issues, store closures, stock control and working capital, technology and operating efficiencies, relationships with suppliers, and support with banking arrangements.
Claire’s offered ear piercing to kids from four months old, noses from 14 years. Visiting the chain to be staple-gunned was a rite of passage for so many. The burning issue in the wake of its administration is where will teenagers go now?
The insolvency toolkit offers several options for breathing space to put retail businesses on a sounder footing. Managers wishing to explore these shouldn’t hesitate to get in touch with us at Buchler Phillips for a free initial consultation.
Written by James Bryan, Senior Manager at Buchler Phillips, an independent boutique firm, with an impeccable Mayfair London heritage, specialising in corporate recovery, turnaround, restructuring and insolvency.