Over 9000 online retailers in financial “distress”
More than 9000 online retailers are suffering from significant financial “distress” as the retail storm which has dogged the high street this year spreads to companies without physical stores.
Online retailers are increasingly facing major financial strains thanks to returns costs and brutal price competition, according to a new report from insolvency specialist Begbies Traynor.
Over the past three years the number of ecommerce brands facing pressure has risen by 65 per cent to over 9000.
Despite the number of physical retailers facing similar distress hitting nearly 18,000, this number has stayed largely flat throughout 2019.
The issues facing the high street have been widely publicised for the past few years, largely due to the growing prominence of online retail.
However, these figures suggest that the online world is no longer a safe haven for retailers looking to avoid crippling business rates and dwindling footfall, as the increasing costs of returns and huge competition eat into margins.
Around 20 to 40 per cent of all online fashion orders are now returned, commonly at no cost to the consumer, while brands like Boohoo are forced to spend nearly 10 per cent of their income on advertising to stay ahead of competition.
“Looking to 2020, it seems as if the accelerating numbers of online retailers in distress will continue,” Begbies Traynor’s Julie Palmer said.
“The competition online is ferocious but the rewards for those that succeed, such as Boohoo, are huge.”
Peel Hunt’s analyst John Stevenson added: “The biggest issue most online retailers face is getting in front of the customers.
“If you are selling a similar type of product to younger customers as Boohoo and Asos you don’t really stand a chance because they are spending millions on social media influencers and Love Island contestants.”