The Doom of Traditional Brick and Mortar Retailing
Born and raised in Sydney, Australia, Richard Cacho is a Chartered Accountant (ICAEW) and a Licensed Insolvency Practitioner (ICAEW) with over 30 years of commercial and professional experience. After moving to the UK eight years ago, he established his boutique business recovery, turnaround and insolvency services firm – RCM Advisory. Based in Norwich, with satellite […]
Born and raised in Sydney, Australia, Richard Cacho is a Chartered Accountant (ICAEW) and a Licensed Insolvency Practitioner (ICAEW) with over 30 years of commercial and professional experience. After moving to the UK eight years ago, he established his boutique business recovery, turnaround and insolvency services firm – RCM Advisory. Based in Norwich, with satellite offices in London and Cambridge, the company provides services to the SME sector. Below, Finance Monthly speaks to Richard about insolvencies in the hospitality and retail sector and the importance of seeking specialist advice as soon as your business sees any warning signs.
What have been any recent changes in the hospitality sector, from an insolvency perspective?
There has been an explosion of chain restaurants during the past ten years that offer consistent and reliable restaurant food (a cut above fast food but far from fine dining) to the masses at a reasonable price point. Initially, this was exciting and it seemed as though a new brand (‘flavor of the month’) was launching every month.
The costs of establishing several premium locations, in large premises and with themed fit-outs were substantial and these chains needed to find success quickly in order to recoup set-up costs and to pay for high fixed operating costs.
This market segment is now oversaturated and the cracks are appearing, as it is increasingly difficult to generate the footfall and custom required to sustain profitable operations in the face of stiff competition across the board. Giants of the sector such as Byron Burgers and Jamie’s Italian are recent casualties and are closing numerous outlets under the strain of massive debts and unprofitable trade.
I see rapid consolidation occurring in this sector and many of the chain restaurant brands will be forced to reduce the number of outlets they operate and to keep only flagship outlets and smaller, profitable ones, located away from the flagship. Thus, the brands won’t all disappear but I expect a reduction in the number of restaurant locations.
Is this all bad? No; opportunities will arise for entrepreneurial restauranteurs to fill the void with interesting, standalone restaurants that will be offering more bespoke dining experiences!
How is the increasing popularity of online retailing affecting the brick and mortar retailing?
I believe that traditional brick and mortar retailing is doomed and the evidence is all around us. I am not afraid to admit that I do most of my shopping online now, so, in a way, I am contributing to the realisation of my own prophecy!
When I go to the shops, which is rare these days, I’m either being dragged around by my wife and teenage daughters or I am on a mission (like every man) to buy a specific item that I’ve already researched online. My observations are that there are many shoppers browsing but I don’t really see many people buying. Many retail outlets in shopping malls have more staff than customers. That’s how it looks to me anyway.
This is not very scientific so far, I know. On the other hand, however, I do know that courier companies are doing a roaring trade delivering items purchased online. This is how I do most of my shopping these days. The convenience, the discounted prices, the money back guarantees, the great choice, etc. – it is the way of the future as far as I can tell!
What do brick and mortar retailers need to do in order to adapt to the change?
It might sound a bit extreme, but I think the operators of retail businesses need to rapidly adapt to the seismic shift in consumer behavior and wants or face extinction – or face certain insolvency. As an insolvency professional, I do have some ideas to offer my clients, on a case-by-case basis; one example of what could be implemented would be a hybrid system of retail.
In your opinion what will the future of brick and mortar retail look like?
Following on from my answer to the previous question, I believe that the future of retail is for much smaller retail floor space, where a selection of items would be available for customers to view and try, combined with an online ordering and delivery system. This would provide a perfect blend of a touchy-feely shopping experience, competitive pricing of goods and the convenience of having the goods delivered to one’s home or place of work. My vision for the future of retail has implications for both shop owner/operators and investor/landlords.
What’s the importance of seeking specialist advice as soon as you see warning signs of possible business insolvency?
Enormous. Early intervention strategies are more likely to succeed and will provide more options and flexibility. RCM Advisory offer a no-cost and obligation free initial consultation, so there are no excuses if you think your business is heading in the wrong direction.
Contact RCM Advisory on 0800 288 4088 for a no-cost and obligation free initial consultation.