With recent news that high street fashion retailers Oasis and Warehouse are the latest UK chains to collapse into administration, it is clear that the current COVID-19 crisis will leave an indelible mark on the economy for months, and probably even years, to come.
But as certain sectors brace themselves for further impact, what can business leaders learn from the latest news? Here are five key aspects to consider:
Oasis and Warehouse are not the first to falter (and are unlikely to be the last)
In recent weeks we have seen multiple chains struggling to stay afloat as lockdown measures to control the coronavirus pandemic keep shoppers away from the high street. Problems at Laura Ashley, Debenhams and Cath Kidston have now come to a head, but with many retailers already struggling before the UK government’s social distancing measures were introduced, we are likely to see further examples of well-known names who are unable to make it through this difficult period.
The below chart shows an overview of the financial health of the UK’s leading clothing retailers according to the latest analysis conducted by Plimsoll Publishing. While certain companies are clearly struggling, it is reassuring to note that a significant number should be strong enough to survive this challenging period.
Interdependent retailers could be most at risk
We have already seen UK department stores suffering in recent years due to changing consumer habits and competition from online retailers. It is perhaps inevitable that the knock-on effects of their problems are now being seen elsewhere. Oasis and Warehouse have more than four times the number of concessions in third-party retailers (including Debenhams) as they do standalone stores. The fact that the British high street has become so interlinked could have disastrous consequences when key parts of the retail ecosystem begin to collapse.
It’s not bad news for all sectors – but will this be short-lived or a longer-term trend?
While social distancing measures and working from home have turned consumers away from fashion purchases, other industries have reported unprecedented online sales. Sales of DIY supplies, computer accessories and online subscription services have all seen a spike in recent weeks.
But while these purchases are undoubtedly linked to more “socially distant” consumer lifestyles, it could be argued that other trends were already set in motion before the lockdown and the current situation has only accelerated what would have come to pass longer-term. If this is the case, it is definitely worth paying close attention to other economic trends that could be magnified by the current socio-political scenario.
All links of the supply chain need to take action
In times of economic difficulty, other stages of the supply chain need to pay attention to potential stumbling blocks that could be faced by key stakeholders. Suppliers to clothing retailers may need to look elsewhere – either to other industries or new markets – to safeguard their own future.
Similarly, companies operating in sectors where their own suppliers are most likely to take a hit should take action as soon as possible to mitigate the negative impact long term.
None of this should be a surprise
While news of company failures, administrators and job losses are deeply concerning for any invested party, the examples we are seeing are not without precedent – which should be reassuring to business leaders. Nobody can predict the future, and times are as uncertain now as ever. But analysing single companies and wider industries more closely can often uncover pre-existing financial problems. If done early enough, this can give those in charge time to take decisive action. The best thing companies can do now is to stay informed and prepare wisely for whatever comes next.
Plimsoll’s analysis on the UK’s leading clothing retailers provides detailed information on the financial health of the industry’s key players.
For a limited period you can also download a free “Supply Chain Survival” guide to gain invaluable insight into adapting your strategy during these challenging times.
