The plight of the high street: A big issue for small businesses

posted on 30/10/2012 17:59:14 by Timea Szabo

Independent high street retailers face an increasingly uphill battle to fight off the might of big companies

Fighting off the big boys: Independent retailers face a big challenge to keep customers and stay in business

According to research by O2 and the British Independent Retailers Association, a fifth of small independent retailers on the high street are concerned that they will have to close in 2013, unless their sales improve. This is indicative of a larger issue, which has become a hot topic in the media referred to as 'the plight of the high street.'

Online shopping accounts for 13% of UK retail sales (a figure which is expected to increase to one third by 2022, according to The Economist Intelligence) and the high street faces a disadvantage. Interest rates are up, and in addition to high overhead costs associated with the upkeep of brick-and-mortar stores, struggling independent shop owners face an uphill battle against the the 'big boys.'

Interest rates are up, and in addition to high overhead costs associated with the upkeep of brick-and-mortar stores, struggling independent shop owners face a tough battle to keep more powerful competitors at arm's length. Corporate branded stores and chains that open new branches on or close to high streets have larger bargaining power with suppliers and they can spread cost increases across multiple products and outlets (often internationally), providing lower price options to cash-strapped customers.

The high street faces a number of challenges, but two areas in which it can potentially trump more powerful competitors are in customer service and quality of product

Recognising the need to protect the high street, an online activist network, Tescopoly, lists over 500 local campaigns against large supermarket chains. Furthermore, Transition Town Totnes was recently in the news for preventing Costa Coffee from opening a new outlet in Totnes, a town with one of the smallest percentage of branded stores for its size and a high proportion of shops that sell coffee. We have also seen initiatives such as the Distressed Retail Property Taskforce drawing senior advocates of the retail, banking, property and local government sectors, to reconsider the financial structure of the high street, since landlords and banks both find themselves in stalemate over the large number of closed and empty shops.

The rise of online shopping is also affecting high street sales. This now accounts for 13% of UK retail sales and will increase to one third by 2022, according to The Economist Intelligence. Some high street retailers might consider extending their operation through an online store, but this isn't a commercially viable option for everybody. It also comes at added expense, and therefore involves risk.

The high street faces a number of challenges, but two areas in which it can potentially trump more powerful competitors are in customer service and quality of product. Even if the smaller store's prices are slightly higher, it can still retain customers simply by being better than the big boys down the road. Positive news stories about this subject abound. Only last week, betterretailing.com reported how a small coffee shop in north-east London not only held its own with a Starbucks that popped up next door, it forced it to close down completely.

When a branded chain store comes to town, there's no better time for smaller businesses to take on the challenge and up their game. Tongues will be wagging about Goliath's arrival, so David is bound to feature in many conversations. If the reports are good, there could be an opportunity to gain customers, never mind lose them.

What's clear is that customer retention is becoming increasingly challenging for independent retailers - but they can increase their chances of meeting that challenge by making sure costs are under control. For owners and renters of stores on the high street, the third highest operating expense is likely to be business rates. Current research shows that 50% of businesses' current rateable value is likely to be incorrect because property and rental price have fluctuated over recent years.

We can help independent retailers save money in other area with our free and impartial switching service for business gas, electricity, landline, mobile and broadband. We can also help reduce the rates you pay for chip and pin transactions and, through our sister company Make It Cheaper Financial Services, source improved commercial insurance policies for your business.

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