One-third of North West e-commerce firms at risk, finds data

Nearly one-third of North West-based online retailers are at higher than normal risk of failure – a larger proportion than high street retailers, according to new data.

Insolvency trade body R3, which carried out the research, said the findings challenge the perception that e-commerce offers a safe alternative to operating a bricks-and-mortar presence.

The study found that 30% of the North West’s e-commerce firms are at higher than normal risk, in comparison to 23% of department stores, 24% of clothing retailers and 25% of footwear or leather goods shops.

R3 North West regional chair Paul Barber, a partner at professional services firm Begbies Traynor, said the findings demonstrate the particular challenges faced by e-commerce enterprises.

He said: “Today’s technology allows even the smallest firms to sell online but with such low barriers to entry, there is intense competition.

“There is a danger that retailers can become engaged in a ‘race to the bottom’, trying to undercut each other to the point their business becomes unsustainable.”

He continued: “We have seen cases where they are now competing directly with the importer or manufacturer from countries like China which are selling directly to their UK customers at prices they cannot hope to match.

“Online retailers may also face distribution problems and high levels of returns and, as e-commerce becomes ever more sophisticated, they need the skills to drive traffic and constantly enhance the user experience to keep up with rivals.”

Paul further explained that with physical retailers, there is the sense of a ‘two-track economy’, with those located in the region’s three biggest shopping destinations – Manchester, Liverpool and the Trafford Centre – faring better than those based in smaller town centres.

Elsewhere, R3 figures show that music shops have almost completely disappeared from the North West’s high streets. Home furnishing stores, meanwhile, have made a comeback in the region with just 22% at higher than normal risk – despite suffering badly during the last financial crisis.

R3 also said that bookshops, which began to decline with the rise in popularity of the internet and e-readers, are now among the most stable retail sectors with just 16% of businesses considered at an elevated risk.

Paul continued: “Bookshops were one of the first casualties of the internet but those which have survived have successfully transformed their business model, becoming destination venues and attracting a new generation of book lovers. It demonstrates that high street stores which do adapt and embrace change management can still hold their own even in the face of tough online competition.”